In mid-August, the Chinese Ministry of Finance (MOF) and the China Securities Regulatory Commission (CSRC) publicized The Circular regarding Recognizing UK Accounting Firms Undertaking Shanghai-London Connect Auditing Operations relevant to the Chinese Depository Receipts, which illustrated which UK firms are able to apply for such undertakings and regulated relevant procedures as such.
Shanghai-London Connect related operations are referred in full as ‘the interrelated and interconnected auditing operations in Shanghai Stock Exchange and London Stock Exchange with relevance to the Chinese depository receipts undertaken by UK accounting firms.’
This new circular sets out conditions for UK accounting firms to be recognized by China to undertake operations related to Shanghai-London Connect scheme:
- Being registered and established in the UK by law, having acquired licensed certification for performing audits, having maintained a good record of practices, being in a normal status of practice;
- Having a well-found quality control system and a decent international reputation, as well as recognition in the market at a relatively higher level;
- Having the capacity of performing auditing operations in UK with experiences in securities related auditing.
Image by Tumisu from Pixabay
UK accounting firms meeting these three criteria should prepare an online application for registration when applying for undertaking Shanghai-London Connect operations for the first time. Approved applications will be registered by the MOF and the CSRC in conjunction with publishing a name list of approved UK accounting firms. The online registration application channel is http://acc.mof.gov.cn.
Any feedback on the initial registration application will be given in five working days. In case of being requested to provided additional documents or modifications, UK accounting firms have also five working days to complete the requested matters. In case of approved applications, whereas firms have been recognised to perform Shanghai-London Connect related operations, UK firms are asked to submit updated information in five working days after the change if any alteration in the registration file has taken place. The same application form is to be used for information update.
Needless to say, all materials prepared by UK accounting firms for such a registration should be checked by their authenticity, correctness and completeness. Incomplete information for registration or materials not meeting the requirements set will be subject to a request on completion or correction from the MOF and the CSRC. A deadline will be attached to such a request. Missing this deadline will result in unregistered status.
The MOF and the CSRC will ask firms that are not following the set procedures or are submitting false and fake materials to make corrections within a defined period of time. Failure to appropriately follow the adherence request before the time given elapsed will result in disqualification of the approved undertakings circulated to the public, firms with pending application to be registered and approved will be rendered a refusal on application and be listed in a special observation list. New regulations bring in new possible consequences in each scenario, which can be worthy of attentions for accounting firms.
Global Connect Admin B.V. | Xuan Hao
