WASHINGTON — The Coalition for a Prosperous America (CPA) today expressed concern after the Public Company Accounting Oversight Board (PCAOB) announced an agreement with China regarding audits of Chinese firms listed on U.S. exchanges. PCAOB has refused to make the framework agreement public, but asserts that it allows U.S. inspectors to travel to Hong Kong to inspect Chinese audits and firms.
Under the Holding Foreign Companies Accountable Act, Chinese and other foreign companies traded on U.S. exchanges must be delisted if, in three consecutive years, they do not allow the PCAOB to oversee their audits in the same way American and other foreign companies are required to do so. It also requires public companies to disclose whether they are owned or controlled by a foreign government, including the Chinese government and Communist Party.
Outrageously, a Memorandum of Understanding (MOU) agreed to by the PCAOB in 2013 allowed Chinese and Hong Kong based companies to avoid complying with the same independent audit requirements that apply to every other company listed on a U.S. exchange. If the Chinese Communist Party does not allow its firms to comply with U.S. securities law, more than 260 of China’s biggest companies will be delisted in 2024 from U.S. exchanges.
“While there will need to be a replacement MOU for the disastrous 2013 agreement, Chinese companies should simply comply with our laws as a condition of being listed here,” said Michael Stumo, CEO of CPA. “Chinese companies listed on U.S. exchanges are often fake ‘variable interest entities’ which do not provide basic shareholder rights. “These shell companies are able to raise capital on U.S. exchanges, but the contracts do not actually provide ownership of the operating company to American investors. They are owned or subject to control by the Chinese government.
“We are concerned that this PCAOB agreement, which requires auditors to travel to Hong Kong to examine audit methods and integrity, as well as whether the Chinese companies’ books are real or fake, will allow China to avoid fully complying with our investor protection laws at the behest of Wall Street firms who generate billions in fees from these firms,” continued Stumo. “U.S. investors should no longer provide hundreds of billions of dollars to the casino economy of China which is subject to the whims and empire building goals of Chairman Xi and the CCP.”
Last year, CPA CEO Michael Stumo wrote in The Washington Times that the “Biden administration should move swiftly to ensure that China’s ruling Communist Party can no longer fund its predatory agenda with Wall Street’s help.”
