China: Announced China and US audit supervision cooperation agreement

On 26 August 2022, the Securities Regulatory Commission, alongside the Ministry of Finance of China and the Public Company Accounting Oversight Board of the United States (PCAOB), signed a cooperation agreement aimed at increasing cooperation and offering the PCAOB access to the documents of registered public accounting firms based in China and Hong Kong for inspection and investigation purpose. The PCAOB stated that it would have “sole discretion” regarding the selection of firms that will be investigated or inspected, and it will be able to retain information obtained during its inspections. The PCAOB stated it would start conducting its inspection in mid-September 2022. The PCAOB has the power to investigate and inspect companies based on the Holding Foreign Companies Accountable Act (HFCAA), which requires companies issuing securities which the PCAOB cannot inspect because they maintain an accounting firm in a foreign jurisdiction where local rules prevent a full inspection, to certify to the Securities and Exchange Commission that they are not owned or controlled by a foreign governmental entity. The HFCAA gives the PCAOB the power to inspect and investigate the accounting firms of the companies that list their securities in the US.