‘Significant problems remain’ in reaching agreement on audits of Chinese companies listed in the United States – SEC official

WASHINGTON, May 24 (Reuters) – “Significant problems remain” in reaching an agreement with China over a long-running dispute over the compliance audit of China-based companies listed on U.S. stock exchanges, an official said. of the United States Securities and Exchange Commission (SEC). tuesday.

SEC international affairs chief YJ Fischer told an audience that the agency’s accounting body, the US Public Company Accounting Oversight Board (PCAOB), should complete audit inspections in China by on Nov. 22 to meet a U.S. deadline that will require non-compliant Chinese companies to be delisted by early 2023.

Fischer added that Chinese authorities should consider removing from US exchanges a “subset of issuers” they deem “too sensitive to comply” with US rules.

“While there has certainly been some progress in discussions on audit inspections in China and Hong Kong, significant issues remain,” Fischer said. “Even if an agreement is signed between the PCAOB and the Chinese authorities, it will only be a first step,” she said, because the United States should then begin inspections on the ground.

In December, the SEC required Chinese companies listed on US exchanges to disclose whether they are owned or controlled by a government entity and provide evidence of their audit inspections.

Under the rule, which implements a law passed by Congress in 2020, more than 200 companies – including Alibaba (9988.HK), Baidu Inc (9888.HK) and Weibo Corp – could be forced off US stock exchanges if they do not comply by early 2023.

Unlike many countries, China has not allowed the accounting regulator to inspect auditors of Chinese companies, partly for national security reasons. US regulators fear the lack of US oversight could put investors at risk.

Several media, including Reuters, had previously reported that the talks had made progress. Although Fischer confirmed this, she warned that time was nevertheless “running” to reach a workable deal before next year.

(This story corrects pronoun in last paragraph)

Reporting by Katanga Johnson in Washington Editing by Michelle Price, Leslie Adler and Matthew Lewis

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