Apr. 8 – Foreign accounting firms entrusted by their overseas principals to conduct temporary auditing on entities in Mainland China now need to apply for qualification approval from provincial financial departments.
“The Interim Provisions on Overseas Accounting Firms Engaging in Temporary Auditing Activities in Mainland China” – formulated by the Ministry of Finance – apply to those accounting firms registered and established in Hong Kong, Macau, Taiwan and foreign countries.
Article Three of the Provisions stipulate that any overseas accounting firm engaging in temporary auditing activities in Mainland China shall submit a written application to the provincial financial department that charges the place where the company conducts its auditing practices.
For application, an overseas accounting firm shall provide the following material:
- An application form for conducting temporary auditing activities within Mainland China
- Copies of the company’s establishment certificate and business license
- An information form on the company’s overseas principal and related domestic institutions
- An information form on the proposed certified public accountants (CPAs) and other related overseas staff
- Copies of the proposed CPAs’ practicing certificates and other related overseas staff’s legal identity documents
- A copy of a power of attorney by the overseas principal
- A copy of confirmation letter by related domestic institutions stating that they accept the temporary auditing practices by the overseas accounting firm
While encouraging the cooperation between overseas and domestic accounting firms, the Provisions emphasize that domestic accounting firms shall not cooperate with overseas firms whose temporary practicing license has not been issued or has been abolished.
It takes usually 20 business days, and no more than 30 business days, for Chinese financial authorities to determine if the company application is accepted. The temporary practicing license issued to Hong Kong and Macau-based accounting firms lasts five years, the license to Taiwan-based firms lasts one year, and the one to overseas firms lasts 6 months.
The Provisions started to take effect on March 21.
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In this issue of China Briefing, we highlight the annual audit procedures all foreign invested enterprises in China must go through. Specific instructions are given for the audit requirements of representative offices, foreign invested commercial enterprises and wholly foreign owned enterprises.