skip to main content



On December 2, 2020, the U.S. Congress passed the "Holding Foreign Companies Accountable Act", which requires the auditors of U.S.-listed Chinese companies give the Public Company Accounting Oversight Board (PCAOB) access to their audit work papers. Chinese companies have three years to comply with this requirement. Otherwise, they would be de-listed from American Exchanges. The Chinese government currently prohibits Chinese accounting firms (including the big four CPA firms) in mainland China and Hong Kong from providing audit work papers directly to the PCAOB for inspections. This legislation will impact more than 200 U.S.-listed Chinese companies currently audited by CPA firms in mainland China and Hong Kong and will have a negative impact on Chinese companies that are audited by China and Hong Kong-based CPA firms.

Chinese companies may consider several options to mitigate this de-listing risk and provide confidence to their investors. The most likely scenario is to engage a large, reputable U.S.-based CPA firm with experience and resources in auditing Chinese companies as well as a compliance record with the PCAOB and the Securities and Exchange Commission (SEC) in the U.S.

Foreign CPA firms are permitted to audit China-based companies directly in China. In July 2015, China’s Ministry of Finance issued Circular (2015) No. 9 titled the “Interim Provisions for Conducting Audits on Chinese Domestic Companies Listed Overseas by Accounting Firms” (“Circular 2015-9”), which provides detailed requirements and procedures for foreign CPA firms to follow when they perform audit services in China. Circular 2015-9 requires foreign CPA firms to collaborate with a qualified Chinese domestic CPA firm and sign cooperation agreements to specify respective responsibilities. Audit work paper prepared in China must be kept by the Chinese domestic accounting firm within China. Foreign accounting firms are required to submit a copy of the audit engagement letter, cooperation agreement with the Chinese domestic firm, and Form 1 with the license information of the audit partners of both foreign and domestic accounting firms

Considering the limitations this legislation poses to the auditors of U.S.-listed Chinese companies, there are very few U.S.-based CPA firms that have the experience and resources to directly perform audit services to Chinese companies in China, and UHY LLP is one of them. UHY has provided audit services to Chinese companies headquartered in mainland China, Hong Kong and Macau. Relevant firms will generally need bilingual employees that speak both Chinese and English, based in the U.S. and in China. During the current pandemic, a CPA firm with advanced audit software is also critical. Firms should bring special value to China-based clients during the pandemic, as our professionals in China are able to perform audit procedures in client’s offices simultaneously with US-based colleagues joining the process virtually. During the pandemic, UHY not only delivered high quality services in a timely fashion, but also met the principal auditor requirements. UHY has maintained a good compliance record with both the PCAOB in the U.S. and the Ministry of Finance in China.        

In addition to a U.S.-based CPA firm, as the second option Chinese companies may also consider CPA firms in other countries that are PCAOB-registered and have experience and resources in auditing U.S.-listed Chinese companies. For example, UHY’s member firms in Australia, UHY Haines Norton, can also audit U.S.-listed companies. There are also Canada-based accounting firms that are auditors of records of some Chinese companies.

To retain foreign-based accounting firms as auditors may be an effective solution for medium and small Chinese companies listed in the U.S. For large Chinese companies, such as Alibaba,, etc. there may be challenges when it comes to switching to U.S.-based CPA firms because the big four U.S. firms are independent from the big four firms in China. This begs the question of how U.S. big four firms would meet the principal auditor requirements and perform the majority of audit work without having to send hundreds of U.S. employees to work in China. One possible solution is that both the big four firms in the U.S. and China act as co-principal auditors and sign the audit reports. The feasibility of such an arrangement is still for debate and the cost would certainly be significantly higher if a company has to pay two big four firms for one audit.  

The fundamental solution is to work out an acceptable arrangement between China’s Securities Regulatory Commission (“CSRC”) and the PCAOB. Under the current arrangement offered by the CSRC, audit workpaper must be provided to the PCAOB through CSRS. The PCAOB usually has direct access to the SEC clients of PCAOB registered CPA firms and selects a few for its inspection. It’s critical for PCAOB to have unrestricted access to audit work paper in their original electronic format saved in CPA firms’ servers.    

We hope that the two agencies will come up with a workable solution in the near future, and the pass of the new Act will accelerate the process. However, Chinese companies also need to consider other options and make long term plans to minimize the uncertainty and risks to protect their investors’ interest.

UHY LLP is one of the very few large CPA firms in the U.S. that has more than a decade of experience in auditing China-based, U.S.-listed companies and has a dedicated China Group with Chinese speaking professionals located in various U.S. locations and in China. We are well positioned to take on more Chinese companies and deliver high quality attest services meeting the PCAOB standards as well as the requirements of Holding Foreign Companies Accountable Act on U.S.-listed Chinese companies.





Complete the form below to speak with one of our professionals

Hide Firm Disclaimer


UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc., and its subsidiary entities. UHY Advisors, Inc.’s subsidiaries, including UHY Consulting, Inc., provide tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors” and “UHY Consulting”. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms. UHY LLP, UHY Advisors, Inc. and UHY Consulting are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP, UHY Advisors and/or UHY Consulting (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

On this website, (i) the term "our firm", "we" and terms of similar import, denote the alternative practice structure conducted by UHY LLP and UHY Advisors, Inc. and its subsidiary entities, and (ii) the term "UHYI" denotes the UHY international network, in each case as more fully described in the preceding paragraph.