Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

Chinese Firms Will Have Until 2022 to Comply With U.S. Accounting Standards

Chris Gaetano
Published Date:
Aug 12, 2020
Treasury Secretary Steven Mnuchin said that the Securities and Exchange Commission (SEC) will soon adopt a recommendation made by the White House that Chinese companies must comply with U.S. accounting rules, else be delisted from the country's exchanges, said Reuters. In particular, according to the Financial Times, they must comply with the requirement that firms allow the Public Company Accounting Oversight Board (PCAOAB) to look at their audits, as is done in the U.S. Chinese firms will have until the end of 2021 to comply before the delisting begins, should the proposal be implemented as-is.

PCAOB access to Chinese audits has long been a source of tension between the two countries. While the PCAOB and its Chinese counterpart tried for years to negotiate a joint inspection agreement similar to the ones established in many other countries, the talks ultimately collapsed in 2015. A major sticking point in negotiations was that a program of the type the PCAOB was proposing would have run afoul of China's strict laws on sharing information with foreign entities. The PCAOB, meanwhile, has expressed concern on numerous occasion about the accuracy of the numbers coming from Chinese audit firms on companies seeking to be listed on U.S. exchanges.

Faced with this newest challenge, China's Secuities Regulatory Commission said that it sent the U.S. a new plan of how to take into account demands for audit information, according to Accounting Today, but did not elaborate on any detail of this new plan. The Chinese regulator, though, also seemed to balk at the necessity of such a plan in the first place, saying that it has never prevented accounting firms from providing audit work papers to foreign regulators.

That statement would appear to contradicted by at least two cases where a Chinese audit firms were de-registered by the PCAOB after failing to provide audit information. In both cases, the firms said that doing so would run afoul of Chinese law; in one case, the government specifically told the firm not to release the informtion.

The de-listing rule, even if it passes quickly, will still need to go through the proposal process before being implemented, which would likely take at least a few months.

Click here to see more of the latest news from the NYSSCPA.