U.S. regulators could finally audit Alibaba and JD.com

September 5, 2022 by
Frank Calviño

U.S. regulators have selected a group of Chinese companies for inspection. As reported by Reuters, e-commerce giants such as Alibaba Group and JD.com will be among the companies selected.

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The move came immediately after Beijing and Washington had reached an agreement on August 26 that finally allowed U.S. regulators to examine the accounting of Chinese companies. This would end a fight that could have seen more than 200 Chinese companies banned from the U.S. stock market.

The Public Company Accounting Oversight Oversight Board (PCAOB) has notified Alibaba that it will be among the first companies to be audited. Alibaba's U.S.-listed shares following the news saw a nearly 3% decline.

PCAOB will select the riskiest first 

The PCAOB, which oversees audits of U.S.-listed companies, announced on Friday that the companies that were to go through the examination process had already been notified. They also announced that their staff will arrive in Hong Kong in mid-September.

The order for passing the audits of U.S.-listed companies will be based on risk factors. Guided by factors such as size and the sector to which they belong.

Kent Bonham, the PCAOB's spokesman, said in late July, "The PCAOB must have full access to the audit work papers of any company it chooses to examine or investigate, no omissions, no exceptions."

Alibaba could come off the expulsion list

On August 1, Alibaba Group announced that it could be delisted from the U.S. Stock Exchange because of the conflict between the Chinese government and U.S. regulators. 

Now things could change with the new agreement: If the PCAOB does not conduct a full inspection or investigation within the next three years, Alibaba Group will remain on the expelled list, otherwise, if the inspection is conducted and yields a favorable result, Alibaba could come off the expulsion list. 

Meanwhile, Alibaba has pledged to continue to comply with laws and regulations and strive to maintain dual listing status on both the New York Stock Exchange and the Hong Kong Stock Exchange

"Hong Kong and New York are important financial centers in the world. Openness, diversity, and high internationalization are their common characteristics. Hong Kong is also the starting point of Alibaba's globalization strategy. We are full of China's economy and future. Firm confidence." said Daniel Zhang, Alibaba’s CEO.

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