Senior officials from the China Securities and Regulatory Commission recently said the country was «sincere» in its desire to resolve the specific issue of tightened accounting standards and potential delistings.
Fang Xinghai, CSRC's vice chairman, told «Bloomberg» that a new proposal was sent earlier this month to the Public Company Accounting Oversight Board (PCAOB) – the U.S. body that will be responsible for assessing if listed firms meet accounting standards.
The proposal includes the suggestion that the Americans select «any of its state-owned enterprises for another trial run» though redaction of some information was insisted over claims of national security concerns.
«As both sides gain confidence we can proceed to handling these sensitive issues so that both sides are satisfied,» Fang said in the interview. «They are a bit more urgent. We are very sincere, but on the other hand, we are also serious about protecting national security information.»
Cold Shoulder
The PCAOB has traditionally demonstrated welcoming sentiments at the highest level with its chairman William D. Duhnke III «happy to meet and talk», according to the report citing an unnamed source.
Fang has yet to receive a response on the latest proposal and when asked about the lack of another pilot auditing project since 2017, the source suggested this could be due to the «general atmosphere».
Real Accounting Risks
Chinese firms listed in the U.S. are increasingly under the spotlight over accounting scandals including Luckin Coffee, Kingold and, most recently, the probe of China’s Netflix, «iQIYI». On Duhnke’s views, they were previously made public in comments about the limitations of pursuing «bad actors» that specifically highlighted China as an example.
«Due to jurisdictional limitations, matters of comity and various other factors, the SEC, Department of Justice and other U.S. authorities may be limited in their ability to pursue bad actors, including in instances of fraud, in emerging markets,» according to a statement, co-authored by SEC chairman Jay Clayton and the PCAOB's Duhnke.
«For example, in China, there are significant legal and other obstacles to obtaining information needed for investigations or litigation. Similar limitations apply to the pursuit of actions against individuals, including officers, directors and individual gatekeepers, who may have engaged in fraud or other wrongdoing.»
