US regulators to inspect audits of Alibaba and other New York-listed Chinese fir...

US regulators to inspect audits of Alibaba and other New York-listed Chinese firms in September: Reuters

US regulators to inspect audits of Alibaba and other New York-listed Chinese firms in September: Reuters

17 hours ago

US regulators have selected e-commerce giant Alibaba and other US-listed Chinese companies for audit inspections starting next month, Reuters reported, citing three sources familiar with the matter.

The move comes after Beijing and Washington reached an audit agreement on Friday, allowing American accounting officials to visit Hong Kong and review the audit records of New York-listed Chinese firms.

Alibaba has been notified that it is among the first batch of Chinese companies whose audits will be inspected by the US audit watchdog, Public Company Accounting Oversight Board (PCAOB), in Hong Kong, according to the report.

PwC, the accounting firm of China's biggest e-commerce company, has also been informed of the audit work inspection.

On Friday, the PCAOB said that it had notified the selected companies, without naming them, and its officials are expected to land in Hong Kong, where the inspections will take place, by mid-September.

According to the PCAOB, it would select companies based on risk factors such as size and industry, and no company can expect special treatment.

In the meantime, securities regulators in Beijing are reportedly making arrangements for US-listed Chinese companies and their accounting firms to transfer their audit working papers and other data from mainland China to Hong Kong.

PCAOB have been demanding complete access to audit working papers of New York-listed Chinese companies, but Chinese regulators have refused to do so, citing data security concerns. Previously, negotiations between officials on both sides have been ongoing for months, but progress has been slow.

Under the Holding Foreign Companies Accountable Act (HFCAA), companies will be delisted if their auditors fail to be inspected by PCAOB for three consecutive years.

Therefore, SEC has added around 160 Chinese companies to its delisting watchlist, including Alibaba, JD.com, Pinduoduo, Bilibili, NIO and more. If these firms failed to meet the audit requirements, they could be kicked off US exchanges as soon as 2024.

To reduce potential delisting risks and expand access to mainland Chinese investors, Alibaba has applied for a primary listing in Hong Kong, which is expected to be completed by the end of 2022. 

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