The Ministry of Finance has recently issued the Interim Provisions on the Auditing Operations Conducted by Accounting Firms concerning the Overseas Listing of Domestic Chinese Companies (the "Provisions") for implementation as of July 1, 2015.
The Provisions shall apply to the auditing, conducted by accounting firms, of financial statements in connection with the direct or indirect issue of shares, bonds or other securities together with the public listing of domestic Chinese companies, and of their post-listing financial statements. The Provisions require the cooperation of overseas accounting firms and domestic accounting firms in carrying out auditing operations with regard to the overseas listing of mainland Chinese companies, for which the parties shall sign a cooperative agreement and negotiate between themselves the allocation of tasks and their respective rights and obligations. The Provisions also require that the working papers of the audit generated within China shall be kept within China by the Chinese accounting firms. The Provisions emphasize that overseas accounting firms shall, both before their operations within China and after the development of the relevant audit report, file for the records their practice and cooperation with the Chinese party with the Chinese authority within a prescribed period of time, otherwise they shall be subject to measures imposed by the financial departments such as notification of wrongdoings for general information, orders to make rectifications before a prescribed deadline, and the transfer of their case to the jurisdiction of Chinese regulatory agencies.