Overseas-listed Chinese companies should favour local accounting firms when selecting an auditor, the government said, amid growing concerns in foreign markets over China's auditing quality. The guidelines issued by the finance ministry on Friday say overseas-listed firms involved in finance, energy, communication and the military should select local accountants to "ensure the safety of national economic information".
Medium- and large-sized companies "should hire accounting firms of sizes that suit their scale, industrial position and social influence", the ministry said. The guidelines were designed to "improve the quality of accounting information" and promote "fair and orderly competition" in the sector, it said.
High-flying shares in Chinese companies listed in the United States have come crashing to the ground recently, amid a flurry of accounting scandals and a crackdown by US regulators. One of the most recent Chinese companies to fall under a cloud is Harbin Electric, whose stock has plunged since a research firm accused it of falsifying documents. The Securities and Exchange Commission has halted trading of several Chinese firms this year, accusing them of violations such as keeping two sets of books or failing to disclose that their auditors had quit.
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