There was much relief for investors in U.S.-listed Chinese firms after Beijing and Washington struck a long-pending audit deal, but legal experts and China watchers warn the two sides could still clash over how the accord is interpreted and implemented.
Scooped by
Richard Platt
onto Internet of Things - Technology focus August 29, 2022 6:01 PM
|
There was much relief for investors in U.S.-listed Chinese firms after Beijing and Washington struck a long-pending audit deal, but legal experts and China watchers warn the two sides could still clash over how the accord is interpreted and implemented. U.S. regulators have for more than a decade demanded access to audit papers of U.S.-listed Chinese companies, but Beijing has been reluctant to let U.S. regulators inspect its accounting firms, citing national security concerns. On Friday, China and the US reached a landmark deal which appeared to give the US everything it wanted: full access to China audit papers with no redactions for any reason; the right to take testimony from audit company staff in China and Hong Kong; and sole discretion to select which companies the US inspects.
All companies and audit firms selected must comply fully for the PCAOB to conclude China as a jurisdiction is in compliance. "The PCAOB will not cut any corners when implementing this agreement," said Paul Leder, the former director of the SEC's office of international affairs. "It knows that both the SEC and Congress will want assurances that the PCAOB has the same access to information when inspecting a Chinese audit firm as it does for one in the U.S," said Leder, who is now a counsel at law firm Miller & Chevalier.
Even if the deal succeeds, China is likely to steer some companies away from U.S. listings in future, given the ongoing underlying conflict over providing access to sensitive data, said Morrison & Foerster's Ellis. "We expect that Chinese headquartered companies with sensitive data that have not yet listed will favour listings in Hong Kong even if the PCAOB issue is resolved,"