WASHINGTON — The Coalition for a Prosperous America (CPA) today released a statement after the Public Company Accounting Oversight Board (PCAOB) announced Chinese auditors were in full compliance with U.S. securities regulations. As a result, more than 170 Chinese companies, many with overt ties to the Chinese Communist Party (CCP), will be able to continue operating on U.S. stock exchanges and maintain access to more than $1 trillion in market capitalization. In August, CPA expressed concerns with PCAOB’s original announcement that it had struck a deal with Chinese regulators.
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 CCP.
CPA also sent a letter to PCAOB Chair Erica Y. Williams and Securities and Exchange Commission Chairman Gary Gensler that outlined concerns that the PCAOB will not be able to completely inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB selected two British-affiliated auditing firms to review, one in Hong Kong and one in mainland China. Instead of conducting proper due diligence, PCAOB used these firms’ openness to U.S. auditors as a litmus test for the entire country. No indigenous Chinese auditing firms were scrutinized and information about Chinese military installations was blocked from review.
“For decades, companies controlled by the CCP have exploited U.S. capital markets and American investors while blatantly flouting U.S. laws and investor protection rules,” said Michael Stumo, CEO of CPA. “We do not believe that PCAOB properly found full compliance with our securities laws. Instead, PCAOB is aiding Wall Street’s misguided desire to extract fund management profits from investing in a casino economy in a hostile nation with opaque companies that cannot and do not operate for U.S. shareholder benefit.
“Thankfully, the Holding Foreign Companies Accountable Act requires Chinese companies to fully comply with U.S. laws and provide complete transparency to U.S. auditors, otherwise they will be delisted from U.S. exchanges,” continued Stumo. “The PCAOB should accept nothing short of this from Chinese companies, and Congress and the Biden administration should examine whether PCAOB did its job and whether the Act needs to be strengthened to achieve its goals.”
Read CPA’s full letter to Chair Williams and Chairman Gensler here.