Cyber Security

China Plans New Checks For Auditors, Accounting Firms

 

Beijing has proposed new laws to ramp up the oversight of auditors and accounting firms dealing with Chinese data, amid an ongoing push to manage national security risks.

In a draft of new measures, China’s finance ministry has proposed that auditors undergo or conduct additional cybersecurity checks when their work involves national security.

The measures, made public on Friday, also laid out how accounting firms should manage data that relates to Chinese firms.

 

Also on AF: China’s Top Bank Paid Ransom After Cyber Attack, Gang Says

 

According to the draft rules, the chief partner of an auditing firm will be responsible for data security.

If approved, the new measures will apply specifically to auditors that have been hired by domestic firms or are conducting cross-border work. The draft is open for public consultation until December 11.

PricewaterhouseCoopers, Deloitte, KPMG and EY – the world’s big four auditing firms – did not immediately respond to requests for comment.

Over the past two years, China’s cybersecurity authority has established policies that outline how all businesses should handle and implement security assessments and checks.

In April the world’s second-largest economy passed a new anti-espionage law outlawing the transfer of any information it deems related to national security.

The law, however, remains ambiguous about what exactly falls under China’s national security or interests.

The US has repeatedly raised concerns about the law, saying foreign businesses conducting regular business activities could face penalties due to its vague nature.

 

 

Heightened national security focus

Concern about data security has prompted Chinese authorities to step up scrutiny of auditors in recent years.

Rules issued in May already stipulate that state-owned companies and listed enterprises should strengthen checks on accountants’ ability to manage information security.

Earlier this year, Beijing also asked some state-owned firms to stop using the four big global accounting firms in an effort to curb the influence of Western auditors.

China’s hesitation to grant full access to regulators also brought US-listed Chinese stocks worth $1.1 trillion to the brink of delisting last year.

The crisis was averted when Washington and Beijing reached a deal to allow audit inspections of US-listed Chinese firms in Hong Kong.

Data security concerns are also part of China’s larger focus on eliminating national security risks within the economy.

President Xi Jinping’s push to shore up China’s defences has led to crackdowns on various industries including the financial sector, raids and fines on accounting and consulting firms such as Capvision and detentions of top executives and ministers, including Qin Gang who was once handpicked as the country’s foreign minister.

 

  • Reuters, with additional inputs from Vishakha Saxena

 

Also read:

 

Former VP of China’s Biggest Bank Latest to Face Graft Probe

 

Capvision Vows to Defend China’s Security After ‘Rectification’

 

China Cybersecurity Rules Seen as Big Risk For Finance Firms

 

China Asks Deloitte to ‘Learn Lesson’ From $31m Audit Fine – FT

 

Missing China Banker Wanted to Move Wealth to Singapore – FT

 

Chinese Minister, ‘Mistress’, Rocket Chiefs All Missing – A/Sentinel

 

China Orders Check on Auditors to Ensure Data Secrecy – FT

 

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at vishakha.saxena@asiafinancial.com

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