The US accounting watchdog’s milestone ends uncertainty over Chinese firms’ stock market delisting

Hundreds of Chinese companies have narrowly escaped the risk of being delisted from the US stock exchange.

In a milestone ending almost two decades of the two countries jousting over auditing processes, the US accounting watchdog has finally secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong yesterday (Dec. 15).

Read more

Without access to these firms’ complete bookkeeping records, the US could have levied trading bans on and delisted these firms by early 2024, as per the Holding Foreign Companies Accountable Act (HFCAA), which became law on Dec. 18, 2020. The HFCAA requires the Securities and Exchange Commission (SEC) to identify public companies that the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate completely because they are being audited by an authority in the foreign jurisdiction.

In August, China struck a deal allowing US auditors to inspect the records of US-listed Chinese companies. The following month, PCAOB personnel were getting down to business at the KPMG and PwC Hong Kong offices. So far, the potential deficiencies identified by the staff are akin to the types and number of findings the PCAOB has encountered in other first-time inspections around the world.

“Congress sent a clear message with that legislation that access to US capital markets is a privilege and not a right, and China received that message loud and…