[August 31, 2022](The Epoch Times reporter Lin Yan comprehensive report) Reuters on Tuesday (August 30) quoted people familiar with the matter as saying that US regulators will conduct audit inspections in Hong Kong from September. The selected objects are listed Chinese companies such as Chinese e-commerce giant Alibaba Group.
Three people familiar with the matter said Alibaba had been notified that it wasAmerican Public Company Accounting Oversight Board(PCAOB) is one of the first batch of US-listed Chinese companies to conduct audit inspections in Hong Kong. PricewaterhouseCoopers (PwC), the accounting firm that audited Alibaba, was also notified to be inspected.
He declined to be identified due to confidentiality restrictions, the sources said.
Before the deadline, Alibaba, PricewaterhouseCoopers, PCAOB, CCPSFCNeither has commented.
Alibaba’s U.S.-listed shares fell nearly 3 percent from a 1 percent gain in premarket trading following the Reuters report.
Alibaba went public in New York in 2014 in the largest IPO in history.As of the 29th, Alibaba’s market capitalization was $256 billion, the most valuableChina concept stockscompany.
For more than a decade, the PCAOB has requested audit papers for Chinese companies listed in the U.S., but Beijing has refused to allow U.S. regulators to conduct relevant checks, citing national security concerns.
US: No companies can get special treatment
The PCAOB also said it had notified selected companies that U.S. officials were scheduled to arrive in Hong Kong in mid-September to conduct vetting work in Hong Kong. The PCAOB said they selected companies based on risk factors, such as company size and industry, and that no company could receive special treatment.
After a series of fraud cases involving Chinese companies listed in the United States such as Luckin Coffee, and the general deterioration of bilateral relations between the United States and China, the United States is pressing for the cancellation of special audit treatment for Chinese companies.
Later in the Trump administration, Congress passed legislation in 2020 that would require delisting foreign companies that refuse to comply with audit regulations. The law poses a particular threat to companies based in mainland China and Hong Kong, which have for three years followed instructions from Chinese authorities to deny U.S. audits of the accounting firms involved. If they continue to reject PCAOB audits, the SEC will legally delist these companies by the end of 2022.
So far, more than 200 Chinese companies have been placed on the SEC’s provisional list that could be delisted if U.S. officials are denied access to their audited statements, including Alibaba, KFC and Pizza Hut operator Yum China Holdings, China Southern Airlines and Internet company Baidu.
Investors: Beijing has the political will to make the deal work
Deteriorating Sino-U.S. relations have hit investor sentiment to the point that the Nasdaq Golden Dragon China Index, which tracks major Chinese companies traded on U.S. exchanges, has lost nearly a third of its value in the past 12 months, the most of the S&P. The 500 index fell three times.
Beijing has been grappling with several major domestic problems, with the economy contracting sharply in the second quarter of 2022 and annual growth slowing after a draconian, widespread COVID-19 policy lockdown.
The Financial Times quoted a portfolio manager at a major global asset manager as saying on Tuesday: “No one is confident, but everyone understands that there is political will to make the deal work.”
The company’s holdings include large U.S.-listed Chinese technology companies.He said that in signingSino-US AuditIt is no coincidence that Beijing has also introduced measures to support the economy at the same time as the agreement.
Sino-US AuditThe agreement has had too many smoke bombs, and investors are cautious
Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), said on the 26th that only whenAmerican Public Company Accounting Oversight BoardThe agreement only makes sense when the (PCAOB) has real and complete freedom to inspect and investigate audit firms in China.
Gensler also said that more than 50 U.S. jurisdictions have complied with the U.S. audit requirements, but two jurisdictions have not, namely China and Hong Kong.
PCAOB and the CCPSFC. The Ministry of Finance announced on the 26th that the two sides reached a rare audit agreement, and China allowed the PCAOB to conduct regulatory inspections and investigations of certified public accounting firms headquartered in mainland China and Hong Kong, China.
This is only the first step in the cooperation between the two parties. The Chinese side seems to have fully agreed to the requirements of the SEC: full access to the audit documents of Chinese companies, and no deletion of audit content for any reason; at the same time, the US securities regulators have the right to obtain testimony from the employees of audit firms in the mainland and Hong Kong, and make their own decisions. Decide to choose which companies to check.
But cracks have emerged beneath the surface cooperation. In a statement on the 26th, the PCAOB said that if the agreement is followed, U.S. regulators will have full access. But Beijing’s statement emphasized that the US must obtain documents through Chinese regulators and conduct interviews and inquiries with Chinese participation and assistance.
The portfolio manager told the Financial Times that there have been many smoke bombs in the past on the issue of the China-U.S. audit agreement, and investors will be cautious even if there is no difference in presentation between the two sides.
Responsible editor: Lin Yan#