Beijing signs audit deal with US over accounting scandals

Regulators in the United States will get access to mainland companies' audit documents under a deal announced yesterday, opening the way to probes of bungled audits after a two-year stand-off between Beijing and Washington.

The non-binding deal is only a partial victory for the US, which has been blocked from investigating accounting scandals at dozens of mainland companies listed on US stock exchanges.

It applies only to enforcement cases against auditors, not against mainland-based companies suspected of accounting fraud. And it does not allow US regulators to do on-the-ground inspections of auditors on the mainland, a key part of efforts to combat fraud.

"This is a step in the right direction," said James Doty, chairman of the Public Company Accounting Oversight Board, the US regulator for audit firms.

The agreement does not replace the need for the board to inspect audit firms in China, he said. The pact calls for the board to co-operate with its counterparts on the mainland, the China Securities Regulatory Commission (CSRC) and the Ministry of Finance, on the exchange of documents. Any non-public documents exchanged will be kept confidential, according to a memorandum of understanding between the agencies.

The signing of the memorandum "is a significant step in China-US audit oversight" and paves the way for cross-border enforcement assistance between the two countries, the CSRC said.