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November 27, 2011updated 29 Apr 2022 7:28am

Risks of fraud higher in China: Andrew

There is a higher risk of fraud in China and greater dialogue between regulators is needed, according to KPMG International chairman Michael Andrew.

“We are seeing a higher instance of fraudulent-like-type activity in some of the Chinese markets then we would in other corporate markets,” he said in a Reuters TV interview.

Andrew said there should be more dialogue between the US and Chinese authorities when it comes to overseeing Chinese companies listed on the US stock exchange. “The two regulators should try and work out whether there’s some basis of mutual exchange of information, joint inspections, but some way in which they can both contribute. At the moment they seem polarised of each wanting to do it independently of the other,” Andrew said.

Andrew also said China is very much like any other emerging economy.

“It is on a journey, it’s increasingly improving its corporate governance and financial reporting systems”, he said. “It’ll take 10 years or a decade to really get up what I’d call a Western standard.”

Andrew said KPMG has been learning about changing some of its audit procedures when dealing with China.

“Getting an independent bank confirmation, for example, in China is not a question of just sending a letter off and hoping that you’ll get something back. We now independently take steps to make sure that we get directly into those accounts without having to rely upon third party intermediaries,” he explained.

Lately, pressure has been mounting on the US Public Company Oversight Board and its Chinese counterpart to work towards enabling cross-border inspections. In the past year, several Chinese companies listed on US stock markets, including Longtop, have been discovered with accounting irregularities.

 

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