Chinese regulators backtracked on a two-month-old rule that forced listed companies, as much as a tenth of whose results may be fraudulent, to open their books to foreign accountants.
The China Securities Regulatory Commission said on its Web site that only companies selling more than 300 million shares need to hire the likes of Arthur Andersen LLP. The CSRC said on December 31 that all companies seeking to sell shares must be audited by both domestic and foreign accountants.
"This is a rule that supplements the earlier statement," said Zhou Xuan, a CSRC spokeswoman in Beijing. She declined to say why the rule was changed.
The change comes even as China prods listed companies to lift management standards amid fiercer rivalry since the nation joined the World Trade Organization. In the two most widely publicized cases, Yinchuan Guangxia Industry Co and Zhengzhou Baiwen Co were punished in 2001 for faking financial records.
The Shanghai Stock Exchange rated 9 percent of its 646 listed "unsatisfactory" when it came to public disclosure. Some 6 percent of Shenzhen-listed companies earned similar ratings, the exchange said.
China's biggest banks are also coming under pressure from the government to hire international accountants to clean up their books as scandals scare off potential investors. In addition, last week the government suspended licenses of five Chinese accounting firms, the Ministry of Finance said.
The new rule also helps China's accounting firms such as Hubei Daxin CPA Firm protect their share of the nation's 8-billion yuan (US$964 million) accounting industry.
Andersen, Ernst & Young LLP, PricewaterhouseCoopers, KPMG LLP and Deloitte Touche Tohmatsu make up an eighth of the industry.
(Xinhua News Agency March 4, 2002)
