This is the Kator Daily Podcast for Thursday, August 20th, 2020.

I'm Caleb Brown.

What Chinese companies list on American stock exchanges,

how do they get away with, in essence,

playing by a somewhat different set of rules.

It's hard to audit the books of companies overseas and at least in this case, the White House

recognizes some of the complicating nuance of effectively telling those companies, either get on board with

approved accounting standards or get off U.S. exchanges.

Jennifer Shelf is director of financial regulation studies at the Cato Institute we spoke last week.

What specifically is the White House asking Chinese companies to do in order to remain listed on US stock exchanges.

The White House, with the President's Working Group on Financial Markets, which made recommendations to the White House.

That working group is made up of the chairman of the SEC and the Secretary of the Treasury and

a few others, is asking Chinese companies to be audited by auditors who are inspected by the PCAOB, the public company

accounting oversight board. the Public Company Accounting Oversight Board.

Complicated history here.

The Sarbanes-Oxley Act put into place back in 2002,

a requirement that all public companies in the United States be audited by PCAOB registered auditors.

And to be a PCAOB registered auditor, you have to be inspected on a semi-regular basis

by the PCAOB.

Since this requirement was put into place in 2002. Chinese audit companies, auditors, the Chinese affiliate of Ernst & Young or of Deloitte and Tush, have not been regularly inspected by the PCA-O-B.

So basically, since the beginning of this requirement was put into place, Chinese auditors have never met it. Due to the requirements of the Chinese government,

state security requirements, privacy requirements, the Chinese government standing in and saying that the PCAOB is not able to

...