The Public Company Accounting Oversight Board ("PCAOB") issued a report designating Hong Kong and China as jurisdictions where the PCAOB is incapable of full inspections of local accounting firms. According to the report, the PCAOB has never been able to conduct a full inspection of a registered accounting firm headquartered in mainland China, and has frequently faced interference from regulatory authorities.
Under PCAOB Rule 6100(a)(1), the PCAOB may determine whether registered firms headquartered in foreign jurisdictions can be fully investigated due to the positions of that jurisdiction's authorities. These determinations are made pursuant to the PCAOB's responsibilities under the Holding Foreign Companies Accountable Act ("HFCAA").
SEC Chair Gary Gensler commended the PCAOB's determination, calling it a "crucial step in protecting investors in the U.S. capital markets." He expressed openness to cooperating with the relevant authorities should they allow the PCAOB to follow its investigatory mandate pursuant to the HFCAA.
Primary Sources
- HFCAA Determination Report on Registered Public Accounting Firms Headquartered in Mainland China of the People's Republic of China and in the Hong Kong Special Administrative Region of the People's Republic of
- Press Release: PCAOB Makes HFCAA Determinations Regarding Mainland China and Hong Kong
- Statement on the PCAOB's Actions from Chair Gary Gensler
- PCAOB Rule 6100: Board Determinations Under the Holding Foreign Companies Accountable Act
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