Asia-Pacific

China Improves Audit Practices, Boosts Independence

New law prohibits the entities being audited from refusing to provide information, delaying such provision, and submitting false information.

China’s National People’s Congress is consulting on a draft audit law that will expand coverage of and strengthen supervision over audit practices in the country.

The law emphasises the need for audit firms to perform their audits honestly, with due care, and professionalism.

Audit firms must also strengthen supervision over auditors’ performance of their duties and compliance with laws, including to keep confidential state secrets, business secrets and maintain privacy of personal data.

The law also imposes requirements on auditor independence, prohibiting auditors from participating in activities that may affect their independence.

The law grants auditors stronger powers to request financial and accounting information, prohibiting the entities being audited from refusing to provide information, delaying such provision, and submitting false information.

“The audited entity shall not transfer, conceal, tamper with, or destroy financial, accounting information and other financial and financial information,” the law states, adding that violations will be punished in accordance with the law, potentially criminally.

Audit firms that discover “hidden dangers” in economic and social operations should promptly file reports to the government or relevant competent authorities.

The law applies to audits of public works projects, social insurance funds, public funds, state-owned resources, state-owned assets, state-owned enterprises, and state-owned and private financial institutions.

The draft law is open for comment until 9 July 2021.

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