China Securities Regulatory Commission, Questions and Answers on the Standards for Information Disclosure by Companies That Offer Securities to the Public No.4 - Differences Between Domestic and Foreign Audits and Bases of...

Issued: August 30 2001
Effective: as of date of issue

Main contents: According to the Rules, where, in relation to a financial company that is listed or proposed to be listed, differences arise between the audit of its financial report by a domestic registered accountant and the audit thereof by a foreign certified accountant, the rules of information disclosure are as follows: (1) in a prospectus, listing announcement or annual report, major financial data as audited by the foreign accountant shall be printed in bold in juxtaposition with their counterparts as audited by the domestic registered accountant; and (2) the board of directors of the company shall give an explanation in the section "Description and Analysis of Business Operations" in respect of the major differences between the two audit reports (Section One). Allocations to the mandatory surplus reserve and mandatory provident fund shall be based on the net profit as audited by the domestic accountant, but allocations to the voluntary surplus reserve and distributions of dividends shall be based on the lower of the two amounts of the net profit as audited by the domestic and foreign accountants (Section Two). If an audit is required of the interim financial report of the company, the same rules apply (Section Three).
Related legislation: Questions and Answers on the Standards for Information Disclosure by Companies That Offer Securities to the Public Nos. 1, 3, 5, 7 and 8.