PCAOB Makes HFCAA Determinations Regarding Mainland China and Hong Kong
The Public Company Accounting Oversight Board (PCAOB) today issued a report on its determinations that the Board is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA).
“To protect investors and to carry out the PCAOB’s mandate, our inspectors and investigators need consistent access across all jurisdictions to the audit work performed for public companies in U.S. capital markets,” said PCAOB Acting Chairperson Duane M. DesParte.
Rule 6100 sets forth three factors that together reflect the access the PCAOB needs to completely execute its statutory mandate with respect to its inspections and investigations. The PCAOB’s determination report provides the PCAOB’s assessment of these factors based on positions taken by PRC authorities. As discussed in the report, PRC authorities assert that access by the Board to audit work papers and related information can be provided only under a cooperative agreement, but they persistently have taken positions that prevent the finalization of, or their full performance under, such agreements.
“We remain interested in a relationship with PRC authorities that facilitates the access necessary to oversee PCAOB-registered audit firms in mainland China and Hong Kong, consistent with the robust international regulatory cooperation we experience everywhere else in the world,” added Acting Chairperson DesParte.
In the 13-month period ended September 30, 2021, 15 PCAOB-registered firms headquartered in mainland China and Hong Kong signed audit reports for 191 public companies with a combined global market capitalization (U.S. and non-U.S. exchanges) of approximately $1.9 trillion.
The PCAOB has issued its determination report to the U.S. Securities and Exchange Commission, which also has responsibilities under the HFCAA. The appendices to the report identify the PCAOB-registered firms subject to the determinations. Under Rule 6100, the Board will reassess its determinations at least annually. For more information, please visit our International page and our Board Determinations Under the Holding Foreign Companies Accountable Act page.
About the PCAOB
The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws.
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