JD.com, Yum China join Alibaba on U.S. audit list, set to happen next month: report
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Following news that Alibaba (NYSE:BABA) would be part of the initial batch set for U.S. audit inspection, JD.com (NASDAQ:JD) and Yum China (NYSE:YUMC) have joined the list, Reuters reported.
The news outlet, citing people with knowledge of the matter, stated that all three companies have been notified of the pending audit from the Public Company Accounting Oversight Board, or PCAOB. Their respective auditors, PwC, Deloitte and KPMG, have been notified as well.
Alibaba (BABA) and JD.com (JD) shares each gained 2% in premarket trading, while Yum China (YUMC) saw fractional losses.
The report comes a few days after the U.S. and China agreed upon a preliminary deal that would see the PCAOB gain access to the books of Chinese firms listed on U.S. exchanges.
The deal was signed off by the Securities and Exchange Commission, the PCAOB, the China Securities Regulatory Commission and the Ministry of Finance of the People's Republic of China.
As part of the agreement, the PCAOB has "sole discretion" to select the firms, perform the audits and levy potential violations during its investigation, with no consultation or input from China.
While seen as "significant," the U.S. said the statement of protocol is only a first step. The PCAOB is expecting to have inspectors on the ground by the middle of next month.
Several Chinese companies, including Alibaba (BABA), JD.com (JD) and Yum China (YUMC) had been added to the list of companies at risk of facing a delisting as a result of the Holding Foreign Companies Accountable Act, or HFCAA.
The HFCAA tasks the PCAOB to determine companies "that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction."
The legislation states that a company would be delisted from a U.S. exchange if it was identified by the SEC for three consecutive years because of the PCAOB's inability to audit it properly.
Hedge fund Bridgewater Associates recently disclosed it made several changes to its portfolio, including selling off Alibaba (BABA) and its holdings in a handful of other Chinese tech stocks.