Question: The U.S. Department of the Treasury recently released a “Report on Protecting United States Investors from Significant Risks from Chinese Companies” (PWG report) prepared by the U.S. President’s Working Group on Financial Markets. For jurisdictions including China where the U.S. Public Company Accounting Oversight Board (PCAOB) has insufficient access to work papers and practices of relevant auditors for U.S. listed companies, the report suggests that the listing standards for companies from these jurisdictions be raised, and various disclosure requirements be imposed. The report also requires currently listed companies in the U.S. satisfying PCAOB’s inspection rules by January 1, 2022. Does the CSRC have any comment on this?
CSRC officials: We’ve noticed the PWG report. It is our long-standing belief that, strengthening supervision over information disclosure of listed companies and improving the professional ethics and practice quality of auditors are extremely important to protect lawful rights and interests of investors. This is a shared responsibility of securities regulators around the globe, which can only be discharged via effective cross-border cooperation in today’s highly globalized capital markets. To address these common interests, an open and cooperative approach is the right choice for both Chinese and the U.S. regulators to resolve the remaining issues in audit supervision cooperation.
As a matter of fact, both sides have always maintained good communications and interactions. Since 2019, the Chinese regulatory authorities have been actively communicating with the US Securities and Exchange Commission (SEC) and the PCAOB, proposing on many occasions protocols for joint inspections over accounting firms, showing full sincerity of cooperation. Not long ago on August 4, 2020, the Chinese regulatory authorities sent another updated proposal to the PCAOB addressing the most recent concerns raised by the US side. We believe the only way to resolve the issues of common concerns and achieve win-win results is to have open and candid dialogue, and only by doing so can regulators together create a sound environment for the healthy and orderly functioning of the global capital market.
It should be noted that the Chinese side has never prohibited or prevented relevant accounting firms from providing audit working papers to overseas regulators. As mentioned in the PWG report, China’s securities regulators have so far provided U.S. securities regulators with audit working papers of a number of Chinese companies listed in the U.S. market. We believe the essence of relevant Chinese laws and regulations is that the exchange of information such as audit working papers should be conducted through regulatory cooperation channels, which is consistent with international norms and common practice.