US regulators complete inspection of US-listed Chinese firms’ audit records, reducing delisting risks

First time in China’s history that Beijing allowed audit records to be taken outside the mainland for inspection

About 170 US-listed Chinese firms had faced the potential risk of being delisted if US regulators had not been able to review audit records

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Hong Kong’s Central district. Two teams of inspectors from the PCAOB spent about seven weeks at the Hong Kong offices of PwC and KPMG going through hundreds of audit working papers in September and November. Photo: Sam Tsang

Published: 10:54pm, 15 Dec 2022Updated: 2:47pm, 16 Dec 2022

The US regulator Public Company Accounting Oversight Board (PCAOB) said on Thursday that it was able to inspect the audit firms servicing mainland Chinese companies listed in the United States, removing the risk of delisting hanging over about 170 such firms.

This is the first time in China’s history that it has allowed audit records to be taken outside the mainland for inspection.

The PCAOB said in a report that mainland Chinese authorities did not prevent its inspectors from carrying out a thorough inspection of audit firms’ working papers in Hong Kong from September to November.

The inspection was carried out under an agreement signed between China’s ministry of finance, the China Securities Regulatory Commission (CSRC), and the PCAOB in late August.

“I want to be clear: this is the beginning of our work to inspect and investigate firms in China, not the end. The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward,” PCAOB chair Erica Williams said in a statement.

“Should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access – in any way and at any point in the future – the board will act immediately to consider the need to issue a new determination,” she added.

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