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June 1, 2010

16 applicants for China’s auditing pilot scheme

Sixteen firms have applied for the H-share auditing pilot scheme, according to the China’s Ministry of Finance (MoF).

MoF accounting chief Liu Yuting said the ministry will pick only the best out of the 16 applicants to become the first Mainland China firms to audit companies listed on the Hong Kong Stock Exchange.

“Working out the regulatory details for these audit firms won’t be a problem, as the chance for audit failure will be very low,” Yuting said.

Successful firms will be required to meet certain criteria to be considered for the scheme, the MoF revealed earlier this year. This includes:

  • Operating revenue of at least CNY300m ($44m) last year, of which at least CNY200m was derived from auditing and at least CNY50m was derived from securities-related businesses;
  • At least 400 CPAs, among which at least 300 staff obtained the CPA qualification through exam;
  • The shareholding proportion of each (natural person) shareholder or the share of properties of each partner shall not exceed 25%;
  • Sound governance structures and systems such as quality control and internal management;
  • A partner or network affiliate firm in Hong Kong.

In 2009, the MoF announced plans to develop 5 to 10 ‘super big’ domestic public accounting firms to challenge the supremacy of the Big Four within the next decade.

Each ‘super big’ accounting firm would have annual audit fee income of CNY3bn.

The ultimate aim is to double the size of the Chinese public accounting profession to combined audit revenue of CNY60bn within a decade.

 

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