By Alex Raymond
China’s Basic Standard for Enterprise Internal Control (“C-SOX”) comes into effect soon and many companies are therefore starting to implement this regulation. While the prospect of adopting new corporate governance and risk management standard may seem daunting, there are some simple steps that companies can take to get a head start on the project. Companies that start implementing C-SOX early will gain competitive advantage and save significant money and resources over the long run. The keys to a successful implementation are to enlist the support of the entire organization, and to set out a reasonable strategy and timeframe for the project.
This series of articles will show how you can get started with the C-SOX now and get the most out of it. First, we will start with an overview of the new regulation and how it will impact companies in China. Part 2 will discuss how to get started with the project and Part 3 will identify more internal and external partners who can help make your C-SOX project a successful one.
Overview of the Basic Standard for Enterprise Internal Control (C-SOX) in China
The Basic Standard for Enterprise Internal Control was announced in 2008 and by the Ministry of Finance, China Securities Regulatory Commission, the National Audit Office, China Banking Regulatory Commission and China Insurance Regulatory Commission. The purpose of the new regulation is to increase the effectiveness of internal controls in listed Chinese companies, thus reducing risks for companies and their stakeholders.
The new regulations requires Chinese companies Shanghai or Shenzhen exchanges to conduct self-evaluations of their internal controls, report annually on internal controls and audit the effectiveness of their internal controls. The Basic Standard will apply to over 900 Chinese companies listed on the Shanghai Stock Exchange and about 800 companies listed on the Shenzhen Stock Exchange.
The purpose of assessing the internal controls and corporate governance is to obtain sufficient knowledge of the control environment to understand the management’s attitudes, awareness and actions concerning the factors of the control environment.
Implementing C-SOX is a change management initiative that can have a significant positive impact on the company. However, in order to do so, companies in China must take certain steps and make sure they have a clear strategy.
Alex Raymond is based in Beijing and is the Founder and CEO of Vast Talent, a company that specializes in compliance and performance management tools. Vast Talent was the first company to launch a compliance system specifically designed to meet the needs of C-SOX.
This is the first part of “Getting a Head Start on Your C-SOX Compliance Project in China”, next week we will publish the second part.