By Joshua Franklin and Echo Wang

China's online grocery firm Dada Nexus Ltd is looking to increase the size of its U.S. initial public offering (IPO) by more than a quarter, people familiar with the matter said on Thursday, as investors brushed off concerns about the auditing standards of Chinese companies pursuing U.S. listings.

Dada's stock market debut, due on Friday, is the latest U.S. IPO by a Chinese company to come after the COVID-19 pandemic rattled the stock market and further soured already tense relations between Washington and Beijing.

On Thursday, U.S. Secretary of State Mike Pompeo warned American investors against "fraudulent" accounting practices of China-based companies.

Dada is seeking to sell 21 million Depository Shares (ADS) at $16 each, raising $336 million, the sources said, cautioning that the price and deal size remained subject to change. The company on Monday had set a price range of $15 to $17 for 16.5 million ADS in the IPO.

E-commerce giant JD.Com and Walmart Inc, existing investors in the company, had expressed interest in buying up to $60 million and $30 million respectively in the IPO, according to Dada's regulatory filing.

Dada declined to comment. The sources requested anonymity as the matter is private.

Nasdaq Inc, the exchange hosting Dada's IPO, tightened its listing rules last month, in a bid to curb IPOs of Chinese companies closely held by insiders and with opaque accounting.

Last month, the U.S. Senate passed a bill which, if enacted into law, would make U.S.-listed companies subject to inspection by the Public Company Accounting Oversight Board. It would delist the companies that failed to comply

The new scrutiny of Chinese IPOs has been driven, at least in part, by Luckin Coffee Inc's accounting issues. The Chinese coffee chain said in May that Nasdaq had notified it of plans to delist it from the exchange, a month after it disclosed that some employees had fabricated sales accounts.

In early May, China's Kingsoft Cloud Holdings Ltd also completed a U.S. listing.

Dada is set to begin trading on the Nasdaq on Friday under the symbol "DADA." Goldman Sachs, BofA Securities and Jefferies are the lead underwriters to Dada's IPO.

(Reporting by Joshua Franklin and Echo Wang in New York; Editing by Sandra Maler)