PCAOB Chair: 'Significant Deficiencies' in China Audits

The PCAOB, established 20 years ago, has gained the ability to inspect and investigate audit firms in China and Hong Kong due to the Holding Foreign Companies Accountable Act passed by Congress in 2020. Recent inspections revealed significant deficiencies in several audit firms, covering 40% of the US market share of companies audited by these firms. The PCAOB aims to provide transparency and information to investors, allowing them to make informed decisions. The inspection process involved a tough agreement with the PRC, ensuring complete access to necessary documents and personnel. The PCAOB is committed to acting if any obstruction occurs in future inspections.

What legislative act allowed the PCAOB to inspect audit firms in China and Hong Kong?

• The Global Financial Oversight Act

• The International Audit Compliance Act

• The Holding Foreign Companies Accountable Act

• The Foreign Audit Transparency Act

How many audit firms did the PCAOB inspect in China and Hong Kong?

• Six firms

• Ten firms

• Eight firms

• Twelve firms

What percentage of the US market share was covered by the firms inspected by the PCAOB?

• 60%

• 40%

• 50%

• 80%

What is the primary role of the PCAOB in relation to the inspected companies?

• To audit the financial statements of the companies

• To manage the financial operations of the companies

• To provide transparency and information to investors

• To decide if companies should be delisted

What was a key requirement in the agreement with the PRC for conducting inspections?

• Limited access to work papers

• Ability to inspect without interference

• Conducting inspections only in Hong Kong

• Approval from Chinese authorities for each inspection