China finance ministry has proposed new regulations mandating auditors to undergo additional cybersecurity checks, particularly for work linked to national security. The draft also outlines guidelines for accounting firms in handling data related to Chinese businesses.
China Finance Ministry Proposal for Auditors’ Cybersecurity Checks
In the past couple of years, China’s cybersecurity authority has been establishing comprehensive policies guiding businesses in executing security assessments and checks. These proposed measures, however, focus specifically on auditors engaged by domestic firms or working across borders. According to the draft, the chief partner of an auditing firm holds primary responsibility for ensuring data security.
The public can provide feedback on these proposed measures until December 11 through an ongoing consultation period. Notably, major auditing firms like PricewaterhouseCoopers, Deloitte, KPMG, and EY—collectively known as the world’s big four—haven’t responded to requests for comment yet.
Growing concerns about data security have prompted Chinese authorities to intensify scrutiny on auditors in recent years. Regulations introduced in May compel state-owned enterprises and listed companies to strengthen checks on accountants’ proficiency in managing information security.
Curbing Western Auditors’ Dominance
In an effort to reduce the dominance of Western auditors, Beijing reportedly urged certain state-owned firms to avoid engaging the four major global accounting firms. Additionally, the U.S. and China resolved a longstanding dispute last year concerning auditing compliance of U.S.-listed Chinese companies by agreeing to conduct audit inspections in Hong Kong, as China remains hesitant to grant full access to U.S. regulators.
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