Ministry of Finance, China Securities Regulatory Commission, National Audit Office, China Banking Regulatory Commission and China Insurance Regulatory Commission, Basic Guidelines for Internal Controls of Enterprises

Issued: May 22 2008
Effective: July 1 2009
Interpreting Authorities: Ministry of Finance and other relevant departments of the State Council

Applicability: The Guidelines apply to large and medium-sized enterprises established in the PRC (Article 2).

Main Contents: The effective internal controls established and implemented by enterprises shall cover the following aspects: internal environment, risk assessment, control activities, information and communication, and internal supervision (Article 5). Enterprises shall establish a dedicated department or designate an appropriate department to be responsible for organising and coordinating the establishment, implementation and routine work of internal controls (Article 12). Enterprises shall establish an audit committee under the board of directors to be responsible for inspecting the internal controls within the enterprise (Article 13). Where the internal audit department discovers defects in the internal controls during supervision and inspection, it has the right to directly report the same to the board of directors and its audit committee, and the supervisory board (Article 15). Enterprises shall establish an accounting department in accordance with the law and employ accounting professionals. Large and medium-sized enterprises shall have a chief accountant (Article 31). Enterprises shall establish major risk alert mechanism and contingency system for emergency events (Article 37). Enterprises shall establish an information and communication system that sets forth the procedures for collection, handling and delivery of information relevant to internal controls (Article 38).