213 Chinese companies listed in Wall Street under US regulatory investigation

0
527

Issuers that are Audit Clients of PCAOB-Registered Firms from Non-U.S. Jurisdictions where the PCAOB is Denied Access to Conduct Inspections

This list is updated annually based on firms’ annual reports from the most recent year. It was last updated on September 10, 2018.

In order for their securities to be traded in U.S. capital markets, public companies, whether located in the United States or abroad, must comply with certain U.S. legal requirements, including the requirement to periodically file audited financial statements with the U.S. Securities and Exchange Commission.  As required by the Sarbanes-Oxley Act of 2002, the auditor of those financial statements – whether a U.S. auditor or a non-U.S. auditor – must be registered with, and therefore subject to the jurisdiction of, the Public Company Accounting Oversight Board.  This includes undergoing regular PCAOB inspections to assess the auditor’s compliance with U.S. law and professional standards in connection with its audits of “issuers,” as defined in the Sarbanes-Oxley Act.

PCAOB inspections may result in the identification of deficiencies in one or more of an audit firm’s audits of issuers and/or in its quality control procedures which, in turn, can result in an audit firm carrying out additional procedures that should have been performed already at the time of the audit.  Those procedures have sometimes led to the audited public company having to revise and refile its financial statements or its assessment of the effectiveness of its internal control over financial reporting.  In addition, through the quality control remediation portion of the inspection process, inspected firms identify and implement practices and procedures to improve future audit quality.

Because of the position taken by certain non-U.S. authorities, the PCAOB currently is prevented from inspecting the U.S.-related audit work and practices of PCAOB-registered firms in a European country, China, and, to the extent their audit clients have operations in China, Hong Kong.[1]  As a result of these obstacles, investors or potential investors in U.S. capital markets who rely on the audit reports of PCAOB-registered firms in these jurisdictions are deprived of the potential benefits of PCAOB inspections of these auditors.  For the information of those investors and potential investors, the PCAOB is publishing a list identifying each issuer whose PCAOB-registered auditor is located in a jurisdiction where obstacles to PCAOB inspections exist. This list is derived from annual reports on Form 2 filed with the PCAOB by registered public accounting firms which encompass audit reports issued by the firms in the period from April 1, 2016 to March 31, 2018.  Except where otherwise indicated, the firm indicated in its Form 2 for 2018 (covering the period April 1, 2017 to March 31, 2018) having provided an audit report for the issuer.

The list is limited to issuers for which auditors from the jurisdictions in question reported having issued audit reports.**  At the same time, it should also be recognized that there may be auditors from those jurisdictions, including auditors identified in the list, that play a substantial role in the audits of numerous multinational issuers not listed here.  Even though these auditors do not issue audit reports for such multinational issuers, the audit work they perform is relied upon by the issuer’s principal auditor, in the U.S. or elsewhere.  That work is often significant to the audit of the financial statements the multi-national issuer files with the SEC and would also be within the scope of PCAOB inspections.  Additional information is available under Information Related to International Inspections.

**Some issuers appear in the list more than once, showing more than one auditor. In some cases, this is because the firm had different auditors in different years. In other cases, it is because the issuer had a joint audit, with respect to which more than one auditor reported having issued an audit report. In addition, some companies that appear in the list may have ceased to be issuers since the time of the audit report cited in the relevant firm’s annual report on Form 2. Finally, some auditors shown on the list have been inspected once by the PCAOB, because, in the case of some firms in Hong Kong, the inspections did not involve, or no obstacles were raised to, review of audit work relating to a company’s operations in China.

[1] The position taken by authorities in Mainland China may in some circumstances cause a registered firm located in another jurisdiction to attempt to resist PCAOB inspection of issuer audit work that the firm has performed relating to the issuer’s operations in Mainland China.  Only in Mainland China and Hong Kong, however, is the position of the Chinese authorities effectively an obstacle to inspection of all, or nearly all, registered firms in the jurisdiction.


 

About the PCAOB

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection.

LEAVE A REPLY

Please enter your comment!
Please enter your name here