Key facts
- The U.K. will allow eligible Chinese companies listed in London to use Chinese auditing standards for two years.
- The exemption takes effect on September 1.
- This change aims to attract more international investment and boost London's IPO market.
- Chinese issuers will bypass International Standards on Auditing.
- Auditors must disclose the use of Chinese standards and note they are not equivalent to international ones.
The U.K. is set to ease audit requirements for Chinese companies seeking to list in London, a move designed to attract more international investment and combat a slump in initial public offerings (IPOs). Starting September 1, eligible Chinese firms issuing global depositary receipts on the London Stock Exchange's Stock Connect will be permitted to use their home country's auditing standards for a period of two years, bypassing the need to adhere to International Standards on Auditing (ISAs).
The Financial Reporting Council (FRC) finalized this exemption in July, following a consultation paper released earlier in 2026. The decision was prompted by a request from the U.K. government to revise third-country auditor policies and lower regulatory barriers, thereby enhancing London's competitiveness as a global financial center.
Under the revised directions, auditors using Chinese Standards on Auditing (CSAs) will be required to disclose this in their audit reports and include a statement that CSAs have not been assessed by the FRC as equivalent to ISAs. The FRC will also inform the Financial Conduct Authority that the use of CSAs for these specific audits is a material matter, expecting issuers to provide appropriate public disclosures.