According to the information on the website of the China Securities Regulatory Commission, relevant responsible persons of the China Securities Regulatory Commission answered reporters' questions on the signing of the Sino US audit and supervision cooperation agreement.
1. What is the significance of signing the China US audit supervision cooperation agreement?
A: the signing of the China US audit supervision cooperation agreement is an important step taken by the two sides in solving the problems of China US audit supervision cooperation. It establishes a regulatory cooperation mechanism for the two sides to carry out daily inspection and law enforcement cooperation on accounting firms within the scope of common supervision according to law, and lays a foundation for the two sides to carry out reciprocal and efficient cooperation in the next step on the premise of meeting their respective legal provisions and regulatory requirements, It conforms to the international common practice of capital market regulatory cooperation. The audit and regulatory cooperation between China and the United States is of positive significance for improving the practice quality of accounting firms and protecting the legitimate rights and interests of investors. It also helps to create a good regulatory environment for enterprises to carry out cross-border listing activities in accordance with laws and regulations.
2. Q: what are the main contents of the China US audit regulatory cooperation agreement?
A: on the basis of the memorandum of understanding on law enforcement cooperation in 2013 and the memorandum of cooperation on pilot inspection in 2016, the China US audit and supervision cooperation agreement signed this time is based on the domestic laws, regulations and regulatory requirements of both sides, the relevant international common practices, the previous cooperation experience of both sides, and repeated consultations. The cooperation agreement mainly makes specific arrangements for both parties to cooperate with relevant accounting firms to carry out daily inspection and law enforcement investigation, and stipulates important matters such as cooperation purpose, cooperation scope, cooperation form, information use and specific data protection.
The cooperation agreement includes the following key contents: first, establish the principle of reciprocity. The terms of the agreement are equally binding on both parties. Both China and the United States may, in accordance with their legal responsibilities, conduct inspections and investigations on the relevant affairs within the jurisdiction of the other party, and the requested party shall try its best to provide full assistance within the scope permitted by law. Second, define the scope of cooperation. The scope of the cooperation agreement includes assisting the other party to carry out inspection and investigation on relevant affairs. Among them, the scope of assistance provided by the Chinese side also involves some Hong Kong firms that provide audit services for China capital stock and deposit the audit papers in the mainland. The third is to clarify the mode of cooperation. The two sides will communicate and coordinate the inspection and investigation plan in advance. The US side must obtain the audit draft and other documents through the Chinese regulatory authorities, and conduct interviews and inquiries with the relevant personnel of the accounting firm with the participation and assistance of the Chinese side.
3. Q: what is the purpose of conducting cross-border audit and regulatory cooperation?
A: when issuing securities and listing on the capital market, enterprises should regularly publish financial reports to provide information for investors to make informed decisions. Laws and regulations of all countries require accounting firms to audit relevant financial reports, and require regulatory agencies to supervise relevant accounting firms to ensure that they perform their duties as "gatekeepers" according to laws and regulations, improve the quality of information disclosure in the capital market, and safeguard the legitimate rights and interests of investors.
In the case of cross-border listing of enterprises, the local accounting firms that provide audit services for these enterprises generally need to register in the listing place and accept the supervision of the local regulatory authorities. As these firms may spread all over the world, in order to supervise them, the regulatory authorities at the place of listing must establish a cooperation mechanism with the local regulatory authorities of the relevant firms to carry out cross-border regulatory cooperation, which is a common practice in the global capital market. If cross-border audit and regulatory cooperation cannot be effectively carried out, it is difficult to be sure whether the audit work of relevant firms meets the regulatory requirements, and the quality of financial statements of relevant listed companies lacks a layer of guarantee, which will cause investors to question. Even according to the laws and regulations of the listing place, the securities of relevant companies cannot continue to be listed and traded in that place.
With the gradual deepening of the two-way opening-up of China's capital market, cross-border listing of enterprises and cross-、-border business expansion of accounting firms have become increasingly frequent. At present, more than 200 Chinese companies are listed on the US capital market, and more than 30 domestic accounting firms are registered in PCAOB, which can provide audit services for Chinese companies listed in the US. PCAOB needs to establish a cooperative relationship with Chinese regulatory authorities to implement cross-border regulatory cooperation in order to fulfill its audit and regulatory responsibilities for the above-mentioned firms. Similarly, if it is necessary for Chinese regulators to implement audit supervision on American accounting firms within the scope of their own supervision, it should also be carried out through the regulatory cooperation mechanism. This is an international practice and both sides need this mechanism. It is beneficial to investors, listed companies and both China and the United States to retain the listing of zhonggai shares in the United States. It is a win-win institutional arrangement. This is an important basis for the two sides to sit down and negotiate and reach an agreement.
4. Q: what is the role of audit working papers in cross-border audit regulatory cooperation?
A: the supervision of accounting firms inevitably involves the audit work papers. Taking the daily inspection as an example, in addition to inspecting the internal control system of accounting firms, the regulatory authorities also need to spot check the audit working papers of some listed companies to test the work quality of the firms. The audit working paper is the "work record" made by the firm on the audit plan, audit procedures, relevant audit evidence obtained and audit conclusions reached during the audit process. The main function of the audit working paper is to record whether the auditors have dutifully verified the accuracy of financial information such as enterprise income and expenditure in accordance with the audit standards. Therefore, it generally does not include sensitive information such as state secrets, personal privacy or enterprise bottom data.
It should be noted that the direct object of audit supervision is the accounting firm, not the listed company audited by it. From the international practice of cross-border audit regulatory cooperation, the regulatory authorities of the listed places generally select some accounting firms for inspection every year, and spot check the representative or potential audit quality risk audit items in the listed companies audited by the inspected firms for verification, so as to evaluate the audit work quality of the firms. The same is true for China US audit and regulatory cooperation. It is not necessary to inspect all audit projects of Listed Companies in the United States every year.
5. Q: under the framework of the cooperation agreement, if the audit working paper contains some sensitive information, can it be protected?
A: in recent years, China's data security law, personal information protection law and other information security related laws and regulations have been implemented in succession. The information security responsibilities of relevant market entities have become clearer and there are more rules to follow in operation. No matter whether an enterprise is listed or not, it has the obligation to strictly abide by its own laws and regulations.
Recently, the China Securities Regulatory Commission and other departments have improved the confidentiality and file management regulations related to overseas listing, put forward clear requirements for standardizing the information security management of audit work papers, further implemented the main responsibility of listed companies for information security, and provided more detailed and executable guidance for listed enterprises and accounting firms to keep and handle confidential sensitive information according to laws and regulations, It is helpful to do a good job in the preparation of the manuscript on the premise of meeting the requirements of accounting and auditing, and protect the relevant information security according to law.
The audit supervision cooperation agreement between China and the United States includes the inspection and investigation activities of the two sides on relevant accounting firms into the cooperation framework. The two sides will fully communicate and coordinate before doing good deeds. The audit working papers and other documents that the United States must view will be obtained and provided through the assistance of the Chinese regulatory authorities. At the same time, the cooperation agreement makes clear provisions on the processing and use of sensitive information that may be involved in the audit and supervision cooperation, and sets up special processing procedures for specific data such as personal information, which provides a feasible path for both parties to perform their statutory regulatory responsibilities and protect the security of relevant information.
6. Q: does the conclusion of the China US audit and supervision cooperation agreement mean that the risk of delisting China capital stocks from the United States has been removed?
A: the signing of the China US audit and supervision cooperation agreement marks a key step forward for the two sides to solve the audit and supervision problems of China capital stocks through strengthening cooperation, which is in line with the expectations and expectations of the market. In the next step, both parties will cooperate with relevant accounting firms to carry out daily inspection and investigation activities according to the cooperation agreement, and make an objective assessment of the cooperation effect. If the follow-up cooperation can meet their respective regulatory needs, it is expected to solve the audit and regulatory problems of China capital stocks, so as to avoid passive delisting from the United States. We look forward to actively promoting cooperation with US regulatory authorities in a professional and pragmatic manner and working together to achieve positive results.
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