Is There Any Substantive Audit Under The Registration System?

Formal audit emphasizes the place of the issuer's legal documents and related information forms, and substantive audit includes compliance judgment and commercial judgment, emphasizing the value judgment of the government to the enterprise. Commercial judgment, for example, in the securities law currently implemented by China, requires the issuer to have "continuous profitability and good financial standing"; compliance judgments, such as the requirements for the authenticity and accuracy of financial statements, and the compliance requirements for tax payment.

The draft indicates that the new securities law takes the US as an important learning object, such as exchange audit, class action and exemption registration system. Moreover, as an economy with similar volume, it has strong capital market driving mechanism for economic development. The registration system in the United States has important reference function for China's registration system reform.

The registration system in the United States is full of substantive audit. At the time of IPO, the US enterprises need to register at the same time as the SEC and the state, and need to pass the audit of the exchange. Among them, the disclosure of the information is mainly by the federal government, and the substantive audit is carried out in all the States to control the risk of securities investment.

"One of the projects that went on, SEC only raised 80 questions in the first round and reduced it to 30 in the second round, but in the following rounds, SEC pursued the accounting treatment and disclosure of the company's pre listing private equity and employee equity options, and raised more than 20 questions in each round, without any sign of giving up or reducing the problem." SEC's concerns about "defects" include: 1, issuers should fully disclose if there are unfavorable sales or income trends in the history of issuers. 2, whether the issuer can disclose the following information: the proportion of different products, production lines, business lines, subsidiaries and subsidiaries to the sales and income of issuers. SEC requires that the revenue or loss sources be identified according to departments and business lines.

The principle of substantive examination of securities issuance in the US states is that securities issuance must be fair, just and equal to investors, such as conflict of interests, whether the issue price is reasonable, whether shareholders' voting rights are intact, and interest in history. dividend How to release the situation and so on.

Look at some facts. Revised draft Emphasizing the disclosure of information and requiring the exchange to "examine the integrity, consistency and comprehensibility of registered documents"; Gui Minjie, director general of the Shanghai Stock Exchange, said, "auditing requires enterprises to disclose clearly. Physical truth 。 For example, the first tier audit personnel will ask 80 questions of enterprises, and ask 30 questions at the second pass. No clear requirement must be made clear so as to restore a real company to investors as much as possible. The number of spring enrollment in the Shanghai Stock Exchange is 152, which is more than three times the number of recruits in 2014 (45 people). Job responsibilities generally contain the requirements of "auditing the listing materials of enterprises". The requirements for legal audit posts include the conditions of "having priority in working experience in IPO projects of well-known law firms", etc. the requirements for Industry Audit posts include the conditions of "priority in securities, fund companies, professional research institutions, and those who have been appointed as industry researchers".

These facts show that under the new law, the Shanghai Stock Exchange is not as simple as a legal filing institution. In fact, judging whether an enterprise has fully disclosed the relevant information of investors' investment decisions requires in-depth understanding and judgment of the company's business operation and compliance. It is impossible to make an accurate judgment when judging whether the issuer's governance structure is compliant or not examining the essence of its governance structure. It is impossible for the exchange to decide whether a issue is compliant or not to carry out substantive examination.