Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 42

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 42
---
 share valuations. As a result, investors may suffer losses as Deswell’s main operations are located in China.

Our auditor, like other independent registered public accounting firms operating in China, is now permitted to be inspected by the PCAOB, and as such, investors will no longer be deprived of the benefits of such inspection; however, the PCAOB had historically been unable to inspect our auditor.

Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Our auditor is located in China, a jurisdiction where prior to December 2022, the PCAOB was unable to conduct inspections without the approval of the PRC authorities. The PRC authorities granted access to the PCAOB to completely inspect and investigate registered public accounting firms operating in China, including our auditor.

Inspections of other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.

We could be delisted if the PCAOB becomes unable to completely inspect and investigate registered public accounting firms in Mainland China and Hong Kong again.

The HFCAA, which was signed into law on December 18, 2020, states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-countertrading market in the United States. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify an issuer as a “ Commission-IdentifiedIssuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate

Table of Contents

completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-IdentifiedIssuer for three consecutive years. However, on December 29, 2022, U. S. Congress passed and the President