What’s new: Nearly 200 U.S.-listed Chinese companies could be at risk of delisting if the accounting watchdog overseen by the U.S. Securities and Exchange Commission (SEC) cannot complete audit inspections and investigations into these firms by early November, an SEC official said.
This timetable would give the U.S. Public Company Accounting Oversight Board (PCAOB) enough time to determine whether a company complies with its audit requirements by a year-end deadline, Y.J. Fischer, director at the SEC’s office of international affairs, said in a speech Tuesday. Companies deemed noncompliant could face delisting from U.S. stock exchanges as soon as early 2023, when they file their latest annual report.
“Time is running out for resolving audit issues involving China,” she said.
The background: Big names like Alibaba Group Holding Ltd. and Baidu Inc. are among the companies caught up in the long-running audit dispute between regulators in the world’s two biggest economies.
Citing state secret and national security concerns, Chinese authorities have refused to directly open auditors’ books to the PCAOB, while U.S. regulators believe that investors are being put at risk from accounting scandals involving U.S.-listed Chinese companies.
In December 2020, the U.S. passed the Holding Foreign Companies Accountable Act, allowing the SEC to ban companies from trading on American exchanges if the PCAOB is unable to check their audit work papers for three consecutive years. Legislation is being considered to shorten the number of non-inspection years to two.
Related: Caixin Explains: What’s Holding China and U.S. Back From Resolving Their Audit Regulation Deadlock
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
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