A Chinese firm which lists its stock on our stock exchanges has to comply with our rules. One of them is a requirement that the company be audited by an auditor registered with the Public Company Accounting Oversight Board, or PCAOB. The PCAOB exercises its oversight of the registered auditors by inspecting their audit working papers.

Audit working papers are the documentation an audit firm keeps internally showing the work they did on an audit and the reasoning they used to express the audit opinion that they did.

Chinese companies are reluctant to hand over these papers for review, which, as this article points out might result in the firms being delisted. Something to think about if you still think investing in Chinese companies is a good idea. This article summarizes the situation:

Academic Sees 20% Chance US Will Evict Chinese ADRs

This is the really interesting original blog posting describing what could happen and why:

Will The US Delist the Chinese?



Laurie Frederiksen
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