ZERO HEDGE reports:

China’s Ministry of Finance has instructed state-owned enterprises to phase out contracts with US-linked global audit firms as Beijing seeks to decouple and curb the influence of Western auditors, according to Bloomberg, citing people familiar with the matter.

Last month, the Ministry of Finance urged SOEs to let contracts expire with the Big Four auditing firms, including PricewaterhouseCoopers LLP, Ernst & Young, KPMG, and Deloitte & Touche LLP. The reason has been due to national security concerns. One of the people said there were no audit request changes for offshore subsidiaries of the Chinese firms. 

Beijing’s objective is to ensure the nation’s data security and limit the influence of US-linked global audit firms. The people also noted the government is attempting to boost the local accounting industry.

No timeline has been provided to companies, and the auditor changes might occur over time as contracts expire. 

The new audit guidance is a reminder that decoupling between China-US is still in full swing. Bloomberg pointed out, “One risk for China is that shifting to lesser-known auditors will make it harder for SOEs to attract capital from international investors.”

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