China tells some U.S.-listed firms to prepare for audit disclosures

Reuters reports that Chinese regulators have asked some of the country’s U.S.-listed firms, including Alibaba, Baidu and JD.com, to prepare for more audit disclosures.

This comes as China’s regulators are considering a proposal to allow their U.S. counterparts to inspect audit working papers of some Chinese firms that do not gather sensitive data.

As part of that move, the China Securities Regulatory Commission (CSRC) and other regulatory agencies earlier this month summoned top internet companies, including search engine leader Baidu Inc and e-commerce major JD.com Inc, Reuters reports.

They were asked to prepare audit documents for the 2021 financial year keeping in mind U.S. regulators’ requests for more disclosure.

The companies should better seek Chinese regulators’ advice if they are “uncertain about anything” during the whole process the first source said, which includes auditing and communications with U.S. regulators.

The latest step by the Chinese regulators shows Beijing’s willingness to make some concessions to resolve a long-running Sino-U.S. audit stand-off that has put hundreds of billions of dollars of U.S. investments in Chinese companies at stake.

The U.S. authorities are moving towards kicking Chinese companies off American stock exchanges, if the companies’ audit records are unavailable for their inspection for three years in a row.

In December, the U.S. Securities Exchange Commission (SEC) finalised rules to delist Chinese companies under the Holding Foreign Companies Accountable Act (HFCAA), and said it had identified 273 companies that were at risk, without naming them.

The SEC earlier this month named for the first time five of these firms, including KFC operator Yum China Holdings and biotech firm BeiGene Ltd, that could face delisting.

Chinese regulators’ deliberations with the New York-listed domestic companies on more audit disclosure were ongoing, Reuters reports.

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