Exclusive: US regulators to review audits of Alibaba, JD.com and other Chinese firms

HONG KONG, August 31 (Reuters) – US regulators choose e-commerce majors Alibaba Group Holding Ltd (9988.HK) and JD.com Inc. (9618.HK) Those with knowledge of the matter are among other Chinese companies on the US list for audit inspections to begin next month.

The election followed a key audit deal between Beijing and Washington on Friday that allowed US regulators to scrutinize accounting firms in mainland China and Hong Kong and ended a longstanding dispute that threatened to expel more than 200 Chinese companies from US stock exchanges. came. Read more

Tech duo with Yum China Holdings Inc. (9987.HK) – Owner of KFC, Taco Bell and Pizza Hut restaurants in China – US audit watchdog, reported to be among the first Chinese group of companies to be audited in Hong Kong by the Public Company Accounting Oversight Board (PCAOB). People who spoke to Reuters said their identities were not disclosed due to privacy restrictions.

Relevant accounting firms of Alibaba, JD.com and Yum China – PwC, Deloitte and KPMG were also notified of the review.

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

Spokespersons for PwC and Deloitte said it was company policy not to comment on customer matters. KPMG declined to comment on the matter.

A PCAOB spokesperson on Tuesday said the board did not comment on the inspections. The watchman could not be reached for comment during US outside hours on Wednesday.

Alibaba’s U.S.-listed stock fell nearly 3% on Tuesday after Reuters’ report, and rose nearly 1% in premarket trading. Hong Kong shares cut their losses to about 1% on Wednesday afternoon, after falling more than 3% in the morning.

US regulators have been demanding access to audit documents of US-listed Chinese companies for more than a decade, but Chinese officials have been reluctant to allow US regulators to audit accounting firms in China, citing national security concerns.

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

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The PCAOB said on Friday it had informed the selected companies anonymously and expects their officials to land in Hong Kong, where the inspections will take place, by mid-September.

The regulator, which oversees audits of companies traded in the US, said it selects companies based on risk factors such as size and industry, and that no company can expect special treatment. Read more

Reuters was unable to immediately identify how many and other Chinese firms were in the first batch of US inspections.

Alibaba was founded in 1999 with its core business e-commerce. In recent years it has expanded into fast-growing industries such as cloud services and IoT, and also owns AutoNavi, a major Chinese digital mapping and navigation firm.

In July, Alibaba was added to the list of Chinese companies that could be delisted if they do not comply with the US Securities and Exchange Commission’s (SEC) audit requirements. Read more

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

Current US rules require Chinese companies that do not comply with audit working paper requests to be suspended from trading in the United States in early 2024.

Days before it was added to the SEC’s delisting watchlist, Alibaba said it plans to add a primary listing in Hong Kong to its New York presence, targeting investors in mainland China. Read more

Already available with a secondary listing on the Hong Kong stock market since 2019, the tech giant said it expects the primary listing to be completed by the end of 2022.

In mid-August, Yum China said it had also applied to apply for the primary listing in the city to eliminate the risk of being delisted from New York. Read more

The company expects the conversion from the current secondary listing status to the primary listing status to be completed in October, subject to shareholder approval.

Julie Zhu reported from Hong Kong; additional reporting by Katanga Johnson in Washington; Editing by Sumeet Chatterjee and Christopher Cushing

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