In the previous article, it was mentioned that China and the US reached an audit cooperation agreement, setting a general direction. However, uncertainties remain in the details, meaning that tail risks have not been fully eliminated. Let’s discuss this today.
1. This time, as a cooperation framework, the full text of the agreement has not been disclosed. While the framework is in place, details still need to be negotiated. When discussing more specific details in the future,it is possible that temporary setbacks could arise due to the influence of bilateral relations. This is the first uncertainty.
2. The US side demands ‘full access.’ What does full access mean? It means the US requires the following three points regarding the investigation methods:
First, the US can freely select the companies to be investigated; second, the investigated companies must retain complete information on audit drafts (this is why several state-owned enterprises collectively delisted last time); finally, they must be allowed to directly question the company's accounting firm.
However, China currently requests that all three investigation methods by the US side be pre-approved by China. Additionally, during investigations, Chinese personnel must be present. Finally, when sensitive information is involved, China must report to higher authorities before evidence can be collected.
Do you see? In short: the US demands direct access to evidence, while China insists on prior consent and approval.
Why does this situation exist? As I mentioned in the previous article, it is due to the differences in powers between the securities regulators of both countries,This is the second uncertainty.
3. The cooperation agreement reached this time is actually for a limited period. Based on the information I currently have, the U.S. side will carry out relevant regulatory testing in early September, and by the end of the year...