Investors monitor stocks at a trading center in Chengdu, Southwest China's Sichuan Province. Photo: VCG

The Shenzhen branch of China Securities Regulatory Commission (CSRC) in recent days held talks with heads of the Big Four accounting firms with the aim to strengthen regulatory oversight on annual report audit service and improve the quality of capital market information disclosure, per a government statement posted on Thursday.

The regulator held six talks with PwC, Deloitte, EY and KPMG and 20 talks with key partners from these accounting firms in recent days, according to the statement. The talks were held in accordance with related policy guidelines in beefing up regulatory oversight for financial and accounting services.

During the meetings, the Big Four accounting firms expressed anticipation to further expand their audit business for clients listed in the Chinese A-share market and briefed the development of their audit business, internal quality control measures and technological standards.

According to data from the CSRC Shenzhen branch, the Big Four accounting firms undertook 2022 annual report audit services for 45 listed companies, or 11 percent of all Shenzhen-based listed companies, under the scope of its regulatory oversight.

And they charged a combined service fee of 390 million yuan ($55.03 million), or 48 percent of all such service fee submitted by listed companies in Shenzhen.

The Big Four will undertake audit reports service for over 40 listed companies' 2023 annual reports in 2024, according to the branch.

The branch urged the Big Four to proactively assume their social responsibilities in conducting audit work, and effectively implement the responsibility for proactive reporting of major accounting and audit issues. They should actively provide suggestions and share experiences in the identification and response of financial fraud as well as in internal control audits and play a good role as industry leaders.

The Big Four were also reminded to adhere to laws and regulations and be compliant in their development and strictly abide by national confidentiality laws and regulations. They should improve the quality of management system and the quality of audit practice, accurately identify, discover and reveal major risks of market entities through audits, and effectively perform the "gatekeeper" duties of the capital market.

Accounting firms should serve and assist the sound and sustainable development of the real economy, implement anti-corruption requirement for intermediaries under the registration-based IPO system, the regulator said.

In March, China's Ministry of Finance imposed an administrative penalty on China Huarong Asset Management Co and its auditor Deloitte for severe distortion of accounting information and serious auditing defects.

The ministry said when providing auditing services to China Huarong, Deloitte failed to perform its duty in objectively evaluating the quality of China Huarong's assets. 

In that penalty, Deloitte was fined 211.9 million yuan.