Beijing, September 5, 2024 – The Chinese Institute of Certified Public Accountants (CICPA) has recently issued a reminder to audit firms, urging them to pay attention to the risks associated with promising not to have their securities business suspended.
In recent times, a number of audit firms have been investigated and penalized by regulators for violating regulations, resulting in the suspension of their securities service qualifications. This has, in turn, impacted the IPO projects they provided audit services for.
In response, companies concerned about being dragged down by audit firms have recently put forth bid conditions requiring tendering audit firms to promise that they will not be suspended by regulators in relation to their business qualifications within a certain period. Furthermore, these firms must also commit to providing compensation equivalent to a certain multiple of the fees paid by the bidder in the event of such suspension.
The CICPA has pointed out that the Law of the People’s Republic of China on Certified Public Accountants stipulates that certified public accountants and audit firms shall independently and impartially perform their duties, and are protected by law. The responsibility of certified public accountants is to execute audit work in accordance with audit standards and relevant professional ethics, and to express an audit opinion on whether the financial statements are prepared in accordance with the applicable financial reporting standards and fairly reflected.
The CICPA reminds audit firms that whether or not their business qualifications will be suspended in the future is influenced by multiple factors and is an unforeseeable event. Adding such promises to the business agreement exceeds the responsibilities that audit firms and certified public accountants should assume.
The CICPA stated that during the bidding process or when accepting business, audit firms should consult with legal experts in a timely manner, fully assess the fairness of relevant audit business agreement clauses, and prudently sign business agreements to protect the legitimate rights and interests of audit firms and certified public accountants. At the same time, audit firms and certified public accountants should strictly comply with the law to fulfill their audit and attestation duties, improve audit quality, play a supervisory role, and ensure independent, objective, fair, and standardized practice.
The CICPA’s reminder comes at a time when the audit profession in China is facing increased scrutiny and regulation. The association’s concerns highlight the importance of maintaining the independence and integrity of audit firms and their certified public accountants in order to ensure the reliability and transparency of financial reporting.
As the Chinese economy continues to grow and develop, the role of audit firms and certified public accountants in maintaining financial order and promoting economic stability has become increasingly important. The CICPA’s reminder serves as a timely reminder to all parties involved in the audit profession to uphold the highest standards of professionalism and integrity.
Views: 0