PwC and KPMG are in the last stages of negotiations with the US regulator on audits of mainland firms at risk of delisting

US regulators are in their last round of talks with PwC and KPMG about audits of mainland companies that could be delisted. A report is due soon.

Two sources with knowledge of the situation say that a group of US regulators is in talks with two Hong Kong accounting firms about their audits of mainland Chinese companies that could be taken off US stock exchanges.

This means that the unprecedented review is almost over, and a report could come out by the end of the year that will likely decide the future of 168 mainland US companies listed on the New York Stock Exchange.

Two teams from the Public Company Accounting Oversight Board (PCAOB) spent about seven weeks at the offices of PwC and KPMG in Hong Kong between mid-September and early November. After going through hundreds of audit work papers, he asked the firms’ accountants about their audits of companies on the mainland.

Before this review, the China Securities Regulatory Commission (CSRC) never let auditors take audit records outside of the Chinese mainland so that the PCAOB could look at them.

The review on-site was done, and the inspectors then went back to the U.S. Two people who know about the situation say that the team recently asked two accounting firms to talk about specific audit procedures and data.

According to the two sources, who also said that the whole inspection process went smoothly, the two companies are currently responding to the US regulator together, which is how the PCAOB usually does things.

On the PCAOB website, it says that if the inspection team finds a possible flaw, they talk to the accounting firm about it, look at more audit records, and may also fill out a comment form about their concerns. A comment form is given to the auditing firm being looked at so that it can respond in writing.

“The PCAOB evaluates the matter to see if it should be included in the inspection report after receiving the firm’s response on the comment form,” said the PCAOB. It was also said that the audit firm added more audit procedures to deal with the issue that the inspectors brought up. Can do

“An inspection may include, on a sample basis, a review of how well a firm’s corrective actions have fixed problems that have been found in the past or that were found during that inspection.”

The PCAOB says that this communication marks the end of the review process that happens before a report is made public. The PCAOB had said before that it wanted to know by the end of this year if the review could meet the needs of US inspectors.

As of June, 15 accounting firms from Hong Kong and the mainland that were registered with the PCAOB audited 168 Chinese companies that were listed in the US and had a market value of $1.5 trillion.

The US Holding Foreign Companies Accountable Act says that these companies could be kicked off US stock exchanges if they don’t let the PCAOB look at their audit records for three years in a row.

The PCAOB said in December last year that China and Hong Kong did not meet the requirements because it could not review audit papers of Chinese companies being audited by accounting firms on the mainland or in Hong Kong.

After the Ministry of Finance, the CSRC, and the PCAOB signed an agreement at the end of August, China sent audit papers for the process.

Sources for the Post say that the regulator on the mainland is glad to see that the regulator in the US is only concerned with making sure that the auditors have done their jobs.

A source who knows mainland regulators said, “Mainland regulators were worried that foreign regulators would try to look at sensitive information during inspections, but the review process has shown that the US regulator is only looking at audit quality.”

This might make mainland China more likely to think about letting US inspectors do audit inspections next year.