The United States Securities and Exchange Commission (SEC), in a statement released on Tuesday, cautioned the country's accounting firms that accepting to lead audits on the new Chinese companies trading in New York could result in a breach of US regulation if "any of its legal or professional obligations with respect to PCAOB [Public Company Accounting Oversight Board] inspection and investigative demands" are not met.
The warning comes amid SEC noticing "foreign issuers located in the People’s Republic of China ('China') or in Hong Kong changing their lead auditor from a local registered public accounting firm to a registered public accounting firm located either in the US or elsewhere." SEC shared that such a move is potentially being made in order to circumvent possible bans on trading, as past quarrels between Washington and Beijing over audit papers threatened to cause delisting of many Chinese companies from American stock exchanges.
