(Yicai Global) Nov. 23 -- The China Securities Regulatory Commission has propounded a plan and suggestions for joint inspections to the US’ Public Company Accounting Oversight Board and wishes to start talks with it as soon as possible to resolve cross-border regulatory issues, the Chinese securities watchdog said on Nov. 20.

This was the agency’s response during a routine press conference to recent rules by the US Securities and Exchange Commission requiring US-listed overseas companies to submit to secondary auditing by accounting firms that the US can check.

US regulators have thus far been unable to inspect the Chinese accountants that audit China’s US-listed companies, the CSRC said, adding these issues of cross-border and collaborative regulation do not mean Chinese firms flout US laws and regulations, however.

All US-listed Chinese companies compile financial reports and discharge their information disclosure obligations or they would be unable to register with US authorities. The CSRC has steadfastly advocated inspections of accounting firms through a collaborative cross-border mechanism to jointly oversee their practices.

The Chinese regulator proposed the fourth edition of its plans and recommendations for joint inspections of accounting firms to the PCAOB after actively considering US demands on Aug. 4. The PCAOB confirmed its receipt of these and noted it would carefully peruse them at the time.

Scaled-Up Scrutiny

China expects US regulators to start negotiations over the specific plans with it and believes the two sides can definitely agree if they maintain an open, professional attitude to foster effective collaborative regulation of auditing and jointly build an excellent administrative framework for cross-border listings, the CSRC added.

The auditing scandal that hit China’s Luckin Coffee chain this year has dialed up the clamor for beefed up oversight of Chinese and other overseas companies that seek US listings.

The SEC proposed new rules requiring US-listed foreign companies to undergo secondary auditing by accountants subject to US supervision by the end of this year. Firms failing to do so will face delisting under the new standards, various media reported on Nov. 17.

The CSRC and other agencies reacted to Luckin’s faked financial data by probing violations by its Chinese mainland operator and associated third-party companies and individuals. China also worked with US market overseers in carrying out joint cross-border inquiries per the collaborative mechanism for trans-frontier regulation of the Madrid-based multilateral International Organization of Securities Commissions.

Pumping Up

Luckin inflated sales by about CNY2.2 billion (USD342.1 million), padded revenue by CNY2.1 billion, costs by CNY1.2 billion and profit by CNY908 million by falsifying its coupon business figures from April to the end of last year. China’s State Administration of Market Regulation levied CNY61 million (USD9.3 million) in fines against Luckin and 43 third parties that abetted this sham bookkeeping, but neither the CSRC nor China’s Ministry of Finance have yet sanctioned the Xiamen-based Starbucks rival.

Luckin was struck from the Nasdaq exchange on June 29, ending a 400-day listing, at a share price of USD1.38, a far cry from its USD17 issue price.

Over 150 Chinese companies traded in the US last year, and their overall market cap reached USD1.2 trillion, per the Bloomberg report.

Editors: Xu Wei, Ben Armour, Xiao Yi