On 28 June 2008, the Ministry of Finance (MOF), the China Securities Regulatory Commission (CSRC), the National Audit Office (NAO), the China Banking Regulatory Commission (CBRC), and the China Insurance Regulatory Commission (CIRC) jointly released a circular on the release of The Basic Standard for Enterprise Internal Control (The Basic Standard) dated 22 May 2008 (企业内部控制基本规范). On 26 April 2010, relevant government regulatory agencies further issued the Application Guidelines for Enterprise Internal Control, Guidelines for Assessment of Enterprise Internal Control and Guidelines for Audit of Enterprise Internal Control (collectively the “Implementation Guidelines”) as the detailed guidelines for Implementing The Basic Standard. All listed companies established within the territory of mainland China will be required to comply with The Basic Standard, and non-listed large and medium-sized Chinese enterprises are encouraged to adopt The Basic Standard.
The Basic Standard outlines the regulatory requirements for Chinese enterprises to establish, evaluate and assess effectiveness of their internal controls and for accounting firms to audit the effectiveness of Chinese enterprises' internal controls. The Basic Standard comprises seven chapters and describes the general provisions and the five control elements: internal environment, risk assessment, control activities, information and communication, and internal monitoring.
The regulatory agencies specified the companies to be affected and the implementation timeline as follows:
||Implementation Guidelines are effective for companies listed, both domestically and abroad, from 1 January 2011. |
||Implementation Guidelines are effective for companies listed on the main board of the Shanghai Stock Exchange and Shenzhen Stock Exchange from 1 January 2012 |
||Companies listed on the Small and Medium Enterprise Board and ChiNext Board shall |
||Early adoption is encouraged for unlisted large and medium-sized companies. |
KPMG in China has a long history of providing internal audit services, including those with a focus on an organisation's financial statements and internal control environment. Our IARCS professional will tap into KPMG International's global resources, including industry specific leading internal control practices to help you comply with The Basic Standard and provide quality services that are in line with The Basic Standard requirements.