Audits of Chinese Companies Start to Face U.S. Inspections
Accounting board to determine if Alibaba, Yum China and other firms can keep American listings
Audit firms’ engagement partners, who supervise the audit work and sign off on the audit report, will typically be asked about the company’s internal controls, revenue-recognition principles, and remote audit policies during the pandemic, Mr. Johnson added.
On top of audit working papers, internal documents including email exchanges between auditors and their issuer clients might be subject to scrutiny if the inspectors deem the information necessary, said Salvatore Collemi, founder of Collemi Consulting & Advisory Services LLC, which advises accounting firms on audit quality control.
Chinese authorities for years denied U.S. regulators access to the records, citing national-security concerns. However, the Chinese securities regulator said last month that audit working papers generally don’t contain state secrets, personal data or other sensitive information.
Some Chinese companies have pursued alternative or primary listings in Hong Kong to hedge the delisting risk. Last month, five Chinese state-owned companies said they would delist their American depositary shares, but they might still be subject to retrospective PCAOB inspections.