Exclusive: Media claims of China phasing out ‘big four’ accounting services refuted; new auditing projects awarded in recent days
Published: Feb 24, 2023 09:29 PM
A view of PwC office in Beijing in January. Photo: VCG

A view of PwC office in Beijing in January. Photo: VCG

Some of four biggest international accounting firms - PwC, KPMG, Ernst & Young and Deloitte & Touche - have won bids to provide accounting services to China's state-owned enterprises (SOEs) in recent days, the Global Times learned on Friday, which stands in part contrast to certain media reports claiming Chinese authorities have urged SOEs to "phase out" using the "big four," citing concerns over data security.

An employee of a leading state-owned fund, who spoke on condition of anonymity, told the Global Times on Friday that the company has not received any guidance documents from China's Finance Ministry on the matter. He recalled that decades ago, China's Finance Ministry played an active role in bringing the "big four" into the Chinese market.

Currently, the "big four" provide services to a host of SOEs in fields such as IPOs, debt issuance and financial statement reviews, industry insiders said.  

A Bloomberg report quoted  anonymous sources close to the matter as saying on Wednesday that China's Finance Ministry has given the "so-called window guidance to some SOEs as recently as last month, urging them to let contracts with the Big Four auditing firms expire."

The four firms have not responded to an interview request from the Global Times as of press time. An insider with one of the big four auditors told the Global Times on condition of anonymity on Friday that he had also noticed certain media reports, but he was "not clear on the accuracy of the report."

The insider added that some of the (recent) projects that the big four signed with SOEs were via their local entities in China.

In fact, all the "big four" companies have become localized enterprises since 2012, when China's Ministry of Finance led the localization process that transformed China-foreign jointly invested limited liability companies to special general partners, the Nanfang Metropolis Daily reported.

The employee of the leading state-owned fund also called for further improvement in the legal framework to ensure that data from SOEs is stored properly in the Chinese mainland, and does not incur the risks of being transferred abroad.   

The Global Times noticed that state-owned insurance company China Taiping announced in mid-February that it had chosen the Chinese office of PwC as the supplier of its 2023-2027 auditor procurement project out of three potential candidates that also included KPMG and Pan-China Certified Public Accountants. The contracts were worth HK$189 million($24 million). 

China Taiping is the only state-owned financial enterprise headquartered overseas, and has been listed among the Fortune Global 500 companies for five consecutive years, domestic news portal reported. The insurer's total assets hit 1 trillion yuan ($144 billion) in 2021. 

In February, the first extraordinary general meeting of shareholders of the Liaoshen Bank, based in Shenyang, Northeast China's Liaoning Province, also approved the decision to choose the Chinese office of KPMG as the auditor of its 2022 financial statement, according to a document on the company's website. 

A guideline issued by China's Ministry of Finance in 2020 specifies six basic qualifications for an accounting firm to be eligible for providing services to state-owned financial enterprises, including keeping the commercial secrets of financial enterprises that are audited, as well as safeguarding national financial information security. 

In 2021, the total revenues earned by the "big four" from providing auditing services to 24 centrally-administrated SOEs was nearly 1 billion yuan, the report said, citing data from the Chinese Institute of Certified Public Accountants.