Active Decoupling-CCP Urged State-Owned Enterprises To Drop ‘Big Four’ Auditors

On 22 February, it was reported that the Chinese Communist Party (CCP) had urged state-owned enterprises (SOEs) to drop the world’s leading “Big Four” auditors. According to guidance issued by the Ministry of Finance of the People’s Republic of China (P.R.C.) in January, Communist China government agencies are reportedly proposing to some SOEs to terminate contracts with the Big Four auditors or to replace service providers with local auditors when the contracts expire.

The guidance came after the CCP agreed with the United States to allow U.S. auditors to examine the audits of hundreds of CCP’s companies listed on the New York Stock Exchange. On August 26 of last year, a briefing by the U.S. Embassy & Consulates in China revealed that the U.S. Public Company Accounting Oversight Board(PCAOB) reached an agreement with the CCP regarding audit inspections and investigations and that about 200 CCP-listed companies would face a trading ban in the United States. Currently, the combined market capitalization of these companies is roughly $1 trillion to $2 trillion.

According to the 2021 Comprehensive Evaluation of Top 100 Accounting Firms released by The Chinese Institute of Certified Public Accountants(CICPA), the 105 auditors on the list have a total revenue of about 66.453 billion RMB Yuan. Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC) ranked in the top four, with a combined income of 20.568 billion Yuan, accounting for 30.95%. Observers have commented that the ban has completely killed the Big Four auditors “China dream” and cut off the back roads for future overseas listings of CCP‘s companies. Xi took another solid step along the way to lock up the country.