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Tri-partite MoU on audit working papers signed by China, HK authorities

The Chinese Ministry of Finance (MOF), the China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) have entered into a Memorandum of Understanding (MOU) on access to audit working papers in mainland China arising from the audits of Hong Kong-listed mainland companies.

The tri-partite MOU, which was signed in Bejing, will facilitate the SFC’s access to audit working papers – created by Hong Kong accounting firms in their audits and kept in the mainland – when conducting investigations into mainland-based issuers or listed companies, and their related entities or persons.

The agreement goes a long way to addressing issues created by China with two rulings that limited access to mainland audit documents. In 2009 the CSRC along with other Chinese regulators barred all working documents related to overseas listings from being allowed abroad and in 2015 the MOF itself stipulated that all audit documents on Chinese companies listed on international exchanges be retained on the mainland.

Under the MoU, the MOF and the CSRC will provide the fullest assistance in response to SFC’s requests for investigative assistance regarding the provision of audit working papers. Earlier this year, in May, the MOF’s Supervision and Evaluation Bureau inked a similar deal with the Hong Kong Financial Reporting Council.

“Over the years, the interdependent regulatory cooperation mechanism between the Mainland and Hong Kong has worked smoothly and achieved remarkable results. The signing of the MoU will further deepen the regulatory cooperation between the two sides, helping to improve the quality of annual reports of listed entities in Hong Kong, and fully protect the legitimate interests of investors in both sides, assuring the healthy development of the accounting industry and the prosperity and stability of financial markets in both sides”, said the MOF’s vice minister Ms Cheng Lihua.

“The signing of the tri-partite MoU is a further refinement and perfection of existing cooperative arrangements for securities regulation between the two sides. It is an important measure to protect the legitimate interests of investors and enhance public confidence. It is also an important milestone to deepen cooperation in securities enforcement on a practical level between the two sides”, said the CSRC’s vice chairman Mr Fang Xinghai in a written statement.

“The tri-partite MoU is a significant milestone to enhance cooperation with the Mainland regulators in order to combat instances of misconduct among Mainland businesses listed in Hong Kong,” SFC CEO Ashley Alder said. 

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