May 11, 2023 5:40
AM GMT+7
By Chris Prentice and Michelle Price
The logo of accounting firm PricewaterhouseCoopers (PwC) is seen on a board at the St. Petersburg International Economic Forum (SPIEF), Russia, June 6, 2019. REUTERS/Maxim Shemetov
WASHINGTON, May 10 (Reuters) - A U.S. accounting watchdog found
unacceptable deficiencies in audits of U.S.-listed Chinese companies performed
by KPMG in China and PricewaterhouseCoopers in Hong Kong, the government agency
said on Wednesday.
The U.S. Public Company Accounting Oversight Board
(PCAOB)published the findings of its inspections after gaining access to
Chinese company auditors' records for the first time last year following more
than a decade of negotiations with Chinese authorities. That access kept
roughly 200 China-based public companies from potentially being kicked off U.S.
stock exchanges.
The deficiencies were
so great that auditors failed to obtain enough evidence to substantiate
companies' financial statements, PCAOB Chair Erica Williams told reporters on
Wednesday. The firms, two of the so-called "Big Four" in global
accounting, represent 40% of the market share of U.S.-listed companies audited
by Hong Kong and mainland China firms, she said.
PricewaterhouseCoopers
(PwC) in Hong Kong said it is working with the PCAOB to address issues raised
and noted the inspection report marks an important milestone for U.S. and
Chinese cooperation. KPMG Huazhen in China said in a statement it has taken steps
to address the issues the PCAOB had found.
While the agency said
it usually discovers problems when first gaining access to a foreign country's
audit records, the deficiencies may raise worries among investors over the
accuracy of U.S.-listed Chinese companies' public financial statements. Some
investors, though, said the findings could ultimately help improve Chinese
company accounting.
"The fact that we
found so many deficiencies is really a sign that the inspection process worked,
and now we can go about the work of holding firms accountable and driving audit
quality," Williams said.
The agency said it
inspected eight audits. It did not disclose which companies' audits it had
selected for inspection, but Reuters has previously reported that Alibaba Group Holding and Yum China
Holdings were among them.
The two companies did
not immediately respond to requests for comment.
"We shouldn’t be
surprised that deficiencies were found," said Brendan Ahern, chief
investment officer of Krane Funds Advisors, which operates China-focused funds.
"One would assume the auditors will take the guidance and adjust their
practices going forward."
The PCAOB will give
the two auditors a year to remediate deficiencies around quality controls, and
the agency will make referrals to the agency's enforcement team where
appropriate, Williams said. Such investigations could ultimately lead to
monetary penalties or barring audit firms from doing work for U.S.-listed
companies.
PCAOB officials have
already begun fieldwork for 2023 inspections. With its 2023 work, the PCAOB
expects it will have inspected auditors representing 99% of the work in the
region.
The agency will
continue to demand full access to do its work, Williams said. If Chinese
authorities begin to limit access for inspections and investigations, a U.S.
law agreed to last year sets a two-year clock for compliance or ouster from American
exchanges.
(This story has been
corrected to change the company's name to 'Yum China' from 'Yum! Brands' and to
fix the Reuters Instrument Code in paragraph 7)
Reporting by Michelle
Price and Chris Prentice
Communism once claimed that they took American money to
fight America
“Honey” from bribes and corruption has weakened world banks
in disbursing funds for projects in authoritarian and communist countries...
Communists even use their own people (citizens) to exchange
and to take advantage of America's money
Let's watch…
No comments:
Post a Comment