Exclusive: U.S. regulators to vet Alibaba, other Chinese firms’ audits -sources

Join now for FREE unlimited access to Reuters.com

  • Alibaba notified of US audit inspection – sources
  • Verification of audits of Chinese companies listed in the United States begins next month
  • Follows landmark US-China audit agreement
  • Alibaba shares fall nearly 3%

HONG KONG, Aug 31 (Reuters) – U.S. regulators have picked e-commerce giant Alibaba Group Holding Ltd (9988.HK) and other Chinese companies listed in the United States for audit inspections starting next month, three sources familiar with the matter said.

The move follows Friday’s landmark audit deal between Beijing and Washington allowing U.S. regulators to vet accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that threatened to fire more than 200 Chinese companies from US stock exchanges. Read more

Alibaba has been told it is among the first group of Chinese companies whose audits will be inspected by the US audit oversight body – Public Company Accounting Oversight Board (PCAOB) – in Hong Kong, the sources told Reuters .

Join now for FREE unlimited access to Reuters.com

PwC, the accounting firm for China’s largest e-commerce company, was also notified of the audit work inspection, the sources said, declining to be identified due to confidentiality constraints.

Alibaba did not respond to a request for comment while a PwC spokesperson said it was company policy not to comment on customer questions.

A PCAOB spokesperson said the board had no comment on the inspections. The China Securities Regulatory Commission (CSRC) did not immediately respond to a request for comment.

U.S.-listed Alibaba shares closed nearly 3% on Tuesday after the Reuters report, after rising about 1% in premarket trading. Its shares in Hong Kong fell more than 3% in Wednesday morning trading as tech giants listed in the city (.HSTECH) fell nearly 2%.

U.S. regulators have demanded access to U.S.-listed Chinese companies’ audit documents for more than a decade, but Beijing is reluctant to let U.S. regulators inspect its accounting firms, citing national security concerns.

Alibaba, which went public in New York in 2014 in what was then the largest listing in history, is the most valuable Chinese company listed in the United States with a market value of $248 billion on Tuesday. .

NO SPECIAL TREATMENT

The PCAOB said Friday that the watchdog had notified the selected companies, without naming them, and that its officials were expected to land in Hong Kong, where the inspections will take place, by mid-September.

The regulator, which oversees audits of U.S.-listed companies, would select companies based on risk factors, such as size and industry, and that no company could expect special treatment, according to the PCAOB. Read more

Reuters could not immediately determine how many and which other Chinese companies were part of the first batch of US inspections.

Founded in 1999, Alibaba takes e-commerce as its core business and has expanded in recent years into fast-growing sectors such as cloud services and the Internet of Things. He also owns AutoNavi Holdings Ltd, a major Chinese digital mapping and navigation company.

In July, it was added to the U.S. Securities and Exchange Commission’s (SEC) list of Chinese companies that could be delisted for failing to meet audit requirements. Read more

The list now has more than 160 Chinese companies, including fellow e-commerce group JD.com Inc. (9618.HK) and electric vehicle manufacturer Nio Inc.

Current U.S. rules state that Chinese companies that fail to comply with requests for audit working papers will be suspended from doing business in the United States in early 2024.

Days before being added to the SEC’s delisting watchlist, Alibaba said it planned to add a primary Hong Kong listing to its New York presence, targeting investors in mainland China. Read more

Already present on the Hong Kong stock exchange with a secondary listing since 2019, the tech giant said it expects the primary listing to be completed by the end of 2022.

Join now for FREE unlimited access to Reuters.com

Reporting by Julie Zhu in Hong Kong; Additional reporting by Katanga Johnson in Washington; Editing by Sumeet Chatterjee and Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

Leave a Comment

Your email address will not be published.