SEC Warns American Auditors not to Provide Services to U.S.-Listed CCP-Backed Companies

On Sep. 6th, the U.S. Securities and Exchange Commission (SEC) warned those US accounting firms providing audit services to US-listed CCP-controlled companies might breach US rules.

 Last month, the US and Communist China reached an audit agreement that under the principle of reciprocity, provides for the SEC to make any audit request to US-listed CCP companies without consulting CCP authorities. The SEC can conduct operations and misconduct audits, including full access to all audit documentation with no redaction, allowing retention of relevant information and direct access to interviews and testimony of relevant personnel involved in the investigations and audits. The signed agreement poses a significant step forward in Washington’s audit of Communist China concepts stocks. In this case, some US-listed CCP-backed companies rapidly switched their lead auditors from a domestic firm to the U.S. or foreign firm, hoping to hire auditors with sufficient regulatory access to avoid a potential trading ban and delisting risk.

 SEC’s acting chief accountant, Paul Munter, noted overseas auditors might not have the local knowledge, expertise, language skills, or access to company personnel necessary to handle audits.

 Given that new lead auditors have to acquire the company’s audit papers and a series of related information from the local predecessors, replacing auditors without real data is tantamount to another coverup and does not address the underlying problem.

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