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Technology

U.S. Regulators To Vet Alibaba, JD.com, Other Chinese Firms' Audits: Sources

U.S. regulators have selected e-commerce majors Alibaba Group Holding Ltd and JD.com Inc among other U.S.-listed Chinese companies for audit inspection starting next month, people with knowledge of the matter said.

The selection follows a landmark audit deal between Beijing and Washington on Friday allowing U.S. regulators to vet accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that threatened to boot more than 200 Chinese companies from U.S. stock exchanges.

Public Company Accounting Oversight Board

The tech duo, along with Yum China Holdings Inc – owner of KFC, Taco Bell and Pizza Hut restaurants in China – have been notified that they are among the first batch of Chinese companies whose audits will be inspected in Hong Kong by U.S. audit watchdog, the Public Company Accounting Oversight Board (PCAOB), the people told Reuters, declining to be identified due to confidentiality constraints.

The respective accounting firms of Alibaba, JD.com and Yum China - PwC, Deloitte and KPMG - have also been notified of the inspection, the people added.

Alibaba, JD.com, Yum China, KPMG and the China Securities Regulatory Commission did not respond to requests for comment.

Spokespeople for PwC and Deloitte said it was company policy not to comment on client matters.

A PCAOB spokesperson on Tuesday said the board did not comment on inspections. The watchdog could not be reached for comment outside of U.S. business hours on Wednesday.

Access To Audit Papers

U.S. regulators have for more than a decade demanded access to audit papers of U.S.-listed Chinese companies, but Chinese authorities have been reluctant to let U.S. regulators inspect accounting firms in China, citing national security concerns.

Alibaba, which went public in New York in 2014 in what was at the time the largest listing in history, is the most valuable Chinese firm listed in the United States with a market value of $248 billion as of Tuesday.

'No Special Treatment'

The PCAOB on Friday said it had notified the selected companies, without naming them, and that it expects its officials to land in Hong Kong, where the inspections will take place, by mid-September.

The regulator, which oversees audits of U.S.-listed companies, said it selects companies based on risk factors, such as size and sector, and that no companies could expect special treatment.

Reuters could not immediately determine how many and which other Chinese firms were in the first batch of U.S. inspections.

Alibaba was founded in 1999 with e-commerce as its key business. It has expanded into fast-growing sectors such as cloud services and internet of things in recent years and also owns AutoNavi, a large Chinese digital mapping and navigation firm.

In July, Alibaba was added to the U.S. Securities and Exchange Commission's (SEC) list of Chinese companies that might be delisted if they did not comply with audit requirements.

The list now has more than 160 Chinese companies including JD.com, Yum China and electric vehicle maker Nio Inc.

News by Reuters, edited by ESM – your source for the latest technology news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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