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

Exclusive: US regulators to probe audits of Alibaba, JD.com and other Chinese firms
Written by boustamohamed31

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  • Alibaba, JD.com, Yum China notified of US audit – sources
  • Audit review of US-registered Chinese firms begins next month
  • A landmark US-China audit deal follows
  • US-listed Alibaba shares closed down nearly 3% on Tuesday

HONG KONG, Aug 31 (Reuters) – U.S. regulators have singled out e-commerce major Alibaba Group Holding Ltd (9988.HK) and JD.com Inc (9618.HK) Among other U.S.-listed Chinese companies for an audit from next month, people familiar with the matter said.

The choice follows a landmark audit deal between Beijing and Washington on Friday, allowing US regulators to examine accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that had threatened to delist more than 200 Chinese companies from US stock exchanges. Read more

The technology duo along with Yum China Holdings Inc (9987.HK) – owner of KFC, Taco Bell and Pizza Hut restaurants in China – have been notified that they are among the first group of Chinese companies to have their audits inspected in Hong Kong by the US auditing watchdog, the Public Company Accounting Oversight Board (PCAOB). the people told Reuters, declining to be identified due to privacy restrictions.

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Alibaba, JD.com and Yum China’s respective accounting firms – PwC, Deloitte and KPMG – have also been notified of the review, the people added.

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

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

A PCAOB spokesman on Tuesday said the board does not comment on inspections. The Guardian could not be reached for comment outside US business hours on Wednesday.

U.S.-listed Alibaba shares closed up nearly 3 percent on Tuesday after the Reuters report, after rising about 1 percent in premarket trading. Its Hong Kong shares pared losses to nearly 1 percent on Wednesday afternoon after plunging more than 3 percent in the morning.

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

Alibaba, which went public in New York in 2014 in what was 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.

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

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

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

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

In July, Alibaba was added to the US Securities and Exchange Commission’s (SEC) list of Chinese companies that may be delisted if they fail to comply with audit requirements. Read more

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

Current US rules stipulate that Chinese companies that do not respond to requests for audit working papers will be suspended from trading in the United States beginning in 2024.

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

Already listed on the Hong Kong stock exchange with a secondary listing 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 filed for initial registration with the city as it seeks to avoid the risk of being removed from New York. Read more

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

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Reporting by Julie Zhu in Hong Kong; Additional reporting by Katanga Johnson in Washington; Editing by Sumeet Chatterjee and Christopher Cushing

Our standards: Thomson Reuters Trust Principles.

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