Lately, the China Securities Regulatory Commission ("CSRC") has issued the Rules for the Compilation of Information Disclosure by Companies Offering Securities to the Public No. 14 – Handling of Matters Involved in Modified Audit Opinions (Revised in 2018) (the "Rules"), immediately effective from the issue date.
There are ten articles in the Rules, including general clauses, specific requirements on information disclosure by relevant subjects under modified audit opinions, and the effective date. Amendments set out in the Rules are mainly made in the following four respects. First, for a listed company that receives modified audit opinions due to its clear violation of accounting standards or information disclosure rules, provisions which require the listed company to suspend the trading of its shares are removed. Second, the definition of modified audit opinions and the coverage thereof are updated in accordance with new standards for audit reports. Third, a new requirement is introduced, stipulating that the certified public accountant shall make special explanations if he or she gives modified audit opinions. Fourth, the previous provision, reading "in case of any qualified opinions or adverse opinions that have an impact on a listed company's profits, the listed company is required to deduct the amount under influence when it prepares the profit distribution plan", is removed.