New | US-China deal on audit inspections runs into snags
The top US auditor regulator said negotiations with China to inspect audit firms there have reached a "difficult and frustrating place," the latest hitch in a long-sought agreement to address faulty corporate audits in that country.
Audit regulators from the two countries reached an understanding on inspections earlier this year, "but that has been a difficult achievement for them to push up the line in the Chinese bureaucracy and to get acted on," said Jim Doty, chairman of the US Public Company Accounting Oversight Board.
Doty’s remarks came at a little-publicized meeting last week of a PCAOB advisory group.
Doty told Reuters in July that he expected protocols for inspections to be hammered out this year, after a long standoff between the two countries on auditor oversight.
In an interview on Wednesday, Doty said he was "not sanguine" about an agreement by year end but believes it is achievable in the next three months.
The PCAOB has been working for years for access to inspect auditors of foreign firms that list shares in the United States. Only a handful of countries, including China, continue to block inspections.
A rash of accounting scandals at US-listed Chinese companies triggered billions of dollars of investor losses in recent years, raising concerns about the quality of audits.
China’s state secrets laws deterred audit firms from releasing documents to US regulators looking into the scandals, and sovereignty concerns hampered an agreement on audit inspections.
Some progress came in July when officials from the two countries committed to cross-border inspections during talks in Beijing.
Last year, the two countries also reached a nonbinding deal that called for China to provide audit documents to the PCAOB for enforcement actions, but that pact did not cover on-the-ground inspections.
The US Securities and Exchange Commission disclosed in June that it was in settlement talks with the Chinese units of the world’s four largest accounting firms to resolve its own dispute with them over access to audit documents.
