More than a dozen US-listed Chinese companies have switched from auditors in their home country to ones in the US and Singapore since 2022, reducing the risk they could be thrown off American exchanges, reports the Financial Times. Under a 2020 law called the Holding Foreign Companies Accountable Act (HFCAA), Chinese companies can be delisted if their auditors fail to comply with US accounting standards. Those requirements include allowing inspections of auditors by the Public Company Accounting Oversight Board (PCAOB).
Beijing resisted the US effort until last year when it began to allow the PCAOB to inspect Chinese auditors. On May 10, the regulator released the first results from its inquiries in China and Hong Kong, saying it had found “unacceptable” flaws at two auditors, KPMG Huazhen and PwC Hong Kong.
As the HFCAA was being implemented and strengthened by additional legislation, some US-listed Chinese companies moved to avoid the delisting threat by switching their auditing work to companies in the US and Singapore, which have not fought PCAOB inspections.