untitled design

US and China reach historic audit deal that benefits Chinese techs

Beijing and Washington moved on Friday to end a dispute that threatened to kick Chinese companies, including Alibaba, from US stock exchanges, signing a pact to allow US regulators to scrutinize accounting firms in China and in Hong Kong.

The agreement strains relations between the countries and is a relief to hundreds of Chinese companies, their investors and US exchanges, giving China a chance to maintain access to the world’s most important capital markets.

Otherwise, as many as 200 Chinese companies could be banned from the country’s exchanges, said US Securities and Exchange Commission (SEC) Chairman Gary Gensler.

In announcing the agreement, US officials made a cautious note, warning that it is only a first step and that China’s compliance will be defined by its ability to conduct unobstructed inspections, as the agreement promises.

“This agreement will only be meaningful if the PCAOB Public Enterprise Accounting Oversight Board can really thoroughly inspect and investigate audit firms in China,” he said.

Still, the PCAOB, which oversees audits of US-listed companies, said it was the most detailed agreement the regulator has ever reached with China.

The China Securities Regulatory Commission (CSRC) said the agreement is an important step in addressing the audit issue.

In principle, the agreement appears to have given the PCAOB what it has long demanded, namely full access to Chinese audit working papers without redactions, the right to obtain testimonials from employees of the audit firm in China, and at its sole discretion. to select which companies to inspect.

US officials said they notified the selected companies on Friday morning and are expected to land in Hong Kong, where the inspections will take place, in mid-September.

The Chinese securities regulator said keeping Chinese companies listed in the US benefits investors, companies and both countries.

The rules stipulate that if China does not comply, its companies could be barred from listing on US exchanges until early 2024, but that deadline can be brought forward. Gensler said Chinese companies could still be delisted if inspections are obstructed.

The PCAOB and SEC expect to determine China’s compliance by the end of the year, officials said.

Major US-listed Chinese companies rose in pre-market trading, including Alibaba, Pinduoduo, Baidu, before succumbing to broad selling on Wall Street on concerns about interest rate hikes by the Federal Reserve.

Source: CNN Brasil

You may also like

Get the latest

Stay Informed: Get the Latest Updates and Insights

 

Most popular