Public Company Accounting Oversight Board (PCAOB) on Thursday said it has gotten full access to inspect and investigate the audit work of US-listed Chinese companies.
"For the first time in history, we are able to perform full and thorough inspections and investigations to root out potential problems and hold firms accountable to fix them,” said PCAOB Chair Erica Williams.
The US audit regulator has been demanding complete access to audit working papers of New York-listed Chinese companies, but Beijing refused to do so, citing data security concerns.
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 more than 200 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.
Bilibili and Yum China has converted their secondary listings in Hong Kong to primary listings, ensuring that they could continue to trade publicly on another major international exchange if their U.S. shares are delisted. Alibaba has also applied for a primary listing in the Asian financial hub, which is expected to be completed by the end of this year.
In August, China agreed to let the PCAOB review work papers from Chinese auditors, including the local affiliates of the Big Four global accounting firms. Securities regulators in Beijing reportedly made 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. But the PCAOB said at the time it was skeptical it would receive unfettered access.
With PCAOB's full access, the risks of Chinese companies being delisted appear to be greatly reduced. According to the US-China Economic and Security Review Commission, there were 262 Chinese companies listed in the US with a combined market value of roughly $775 billion as of September 30 this year.