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Speaker 1: Let's get to a story that we've been talking about

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Speaker 1: throughout the program. These two hundred or so Chinese firms

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Speaker 1: that are based either in China or in Hong Kong

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Speaker 1: that until recently threatened to um perhaps face d listing

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Speaker 1: of American stock exchanges or from American stock exchanges, that

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Speaker 1: seems to be no longer the case. Let's take a

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Speaker 1: closer look at the story, with Amanda Icon, Bloomberg's tax

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Speaker 1: reporter joining us from right outside Washington, d C. Boy,

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Speaker 1: I remember a couple of months ago this was a

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Speaker 1: heated issue. How did this get cracked open to a

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Speaker 1: point where we seem to have a little bit of

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Speaker 1: success right now? Sure, that's right. Well, if you remember

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Speaker 1: that the US Audit Board inked to deal with China

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Speaker 1: in August, that set up a framework allowing the regulator

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Speaker 1: for the really the first time, to get access to

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Speaker 1: audit internal records like work papers, to acts, to be

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Speaker 1: able to interview staff and take testimony for investigations. And

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Speaker 1: that framework, Uh, you know, allowed the Board to send

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Speaker 1: staff over there this fall, and they've been hard at work,

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Speaker 1: uh taking a look at the work of audit firms

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Speaker 1: based in China and Hong Kong have found all the

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Speaker 1: information that they were looking for. Is the risk of

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Speaker 1: delisting gone away or is it just diminished now? Sure,

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Speaker 1: but the risk hasn't entirely gone away. These companies aren't

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Speaker 1: quite out of the woods yet, but that the Public

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Speaker 1: Company Accounting Oversight Board announced this morning that they do

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Speaker 1: in fact have the access they need to be able

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Speaker 1: to inspect and investigate audit firms based in these two jurisdictions.

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Speaker 1: And and that's that's a significant first step, right to

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Speaker 1: ensure that auditors based in China and Hong Kong are

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Speaker 1: subject to the same level of oversight as firms in

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Speaker 1: the US and really around the world. The Board has

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Speaker 1: been trying to get that to provide that level of

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Speaker 1: scrutiny for over a decade now and has long been

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Speaker 1: reviewed by the Chinese government, which has really considered audit

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Speaker 1: work papers as state secrets until this agreement was inked

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Speaker 1: over the summer. In terms of what it means for

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Speaker 1: these companies, you know, there is a U S law

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Speaker 1: that is still on the books um that really triggered

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Speaker 1: this UH negotiation between China and the US that led

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Speaker 1: to this opening of audit firm access that we're talking

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Speaker 1: about here tonight, and and and and that law, um

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Speaker 1: you know, is still on the books. And the board

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Speaker 1: has said that if China has impedes its work in

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Speaker 1: any way, that it would change its verdict, that it

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Speaker 1: would find again that China is again interfering with with

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Speaker 1: this US regulatory inspection, and and that could trigger a

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Speaker 1: three year compliance window for companies to find once again

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Speaker 1: a p c o B compliant auditor or face delisting.

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Speaker 1: Um you know, p c o B watchers and and

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Speaker 1: even members of Congress are are cautiously optimistic. But this

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Speaker 1: is really considered to be like a first step to

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Speaker 1: ensuring that that that this routine scrutiny um you know,

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Speaker 1: continues in the weeks of months ahead. As we've been

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Speaker 1: following the story over the years, I can't tell you

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Speaker 1: the number of people from Asia who have pointed out

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Speaker 1: to us, and I need verification on this, that the

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Speaker 1: listing standards in Hong Kong are much stricter than those

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Speaker 1: for the A d R s that would trade here

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Speaker 1: in the US. So clearly, in this case, the resistance

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Speaker 1: seemed to stem, as you pointed out, from concern about

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Speaker 1: confidentiality and national security. I mean, does that show up

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Speaker 1: when the shoe is on the other foot, so to speak,

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Speaker 1: when when you have accounting standards, can that play a

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Speaker 1: part in what's disclosed if you're concerned about national security,

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Speaker 1: let's say, right, So, it's important to understand what it

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Speaker 1: is that the p C O B is looking at

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Speaker 1: their looking at the work of the auditors, not necessarily

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Speaker 1: the internal records of the company that's under audit. And

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Speaker 1: and so there you know, the p C obs how

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Speaker 1: to work through those um thorny issues with their UM

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Speaker 1: counterparts in Beijing. UM the the csr C, the China

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Speaker 1: Securities Regulatory Commission, put out a statement tonight that our

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Speaker 1: Bloomberg colleagues have reported on and it includes a note

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Speaker 1: that UM that both parties performed their supervisory duties and

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Speaker 1: met regulations for information security protection. I mean that that

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Speaker 1: sounds to me like that China felt that those concerns

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Speaker 1: were adequately addressed through this process. But it remains to

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Speaker 1: be seen if that cooperation and that mutual understanding will

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Speaker 1: will continue. The board chairwoman Erica Williams, said today that

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Speaker 1: the board is preparing to continue to do routine inspections

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Speaker 1: again in three and so there will be new more

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Speaker 1: opportunities to test out this August deal to see if

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Speaker 1: it if it still holds. Yeah, maybe a sigh of

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Speaker 1: relief for those US based investors that have been holding

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Speaker 1: some of these Chinese A d r s today. The

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Speaker 1: many of them caught a bid early in the session,

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Speaker 1: kind of in the pre market, but they ended lower

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Speaker 1: across the board, and the NASDAC Golden Dragon China Index

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Speaker 1: ended down uh in concert with much of the US

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Speaker 1: equity market today. Amanda, thank you so much for taking

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Speaker 1: time to chat with us. Amanda icon is a Bloomberg

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Speaker 1: tax reporter, joining us from right outside Washington, d C.

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Speaker 1: Here on Daybreak Asia