Despite the advantages of adopting sustainability reporting practices, many business owners and board directors continue to view sustainability reporting as merely a compliance exercise. They also have the mindset that over-disclosure could result in leakage of trade secrets and loss of competitive advantage.
China's Ministry of Finance has announced that international accounting firms are barred from sending their staff to audit a mainland company. Instead, they are required to team up with local accounting firms so that the domestic partners' accountants will do the audit, reports the South China Morning Post.
The proposals come ahead of Alibaba's huge US listing.
The new rules reinforce the requirement that all accountants must strictly follow the country's secrecy laws and cannot pass on any information to overseas regulators or exchanges.
"The proposal(s) allow mainland companies listing overseas to be able to meet the listing rules of the markets they are going to list in while at the same time the international firms can work with the experienced domestic firms to do the audit. This would enhance the quality of the auditing standards of these mainland companies," the Ministry of Finance paper said.
The proposal did not let international firms decide if they could send staff to do the entire audit work themselves or verify that the job conducted by their mainland partner was done according to internationally accepted auditing standards.
International firms are required to sign off on the books, so they are liable for any audit failures by the local auditing companies.
The rules would also ban the current practice where Hong Kong or international accounting firms could send their staff to do the audit under a temporary licence. The Ministry of Finance paper said these accountants should not be allowed to work on the mainland through temporary licences.
In an interview with the Post, Clement Chan, the president of the Hong Kong Institute of Certified Public Accountants, said that the new rules "would affect international investors' confidence because for the past 20 years Hong Kong and other international accountants have acted as a gatekeeper [for investors and the markets]."
The new rules would be a threat to the jobs of thousands of Hong Kong accountants as they may not be able to work on the mainland.
Stockbrokers interviewed by the Post said the rules came at a time when Beijing was worried that overseas regulators might force accountants or mainland firms to disclose government or company information in the name of checking their books.