US regulators move in on Chinese audit laws

Regulators in the United States have potentially jeopardised the listing of more than 100 stocks from the world's most populous nation, in a move to sanction auditors for blocking investigations at companies based in China.

In an enforcement action against the China-based affiliates of the Big Four accounting firms, the Securities and Exchange Commission escalated a three-year impasse between the two nations over whether auditors can share work documents with regulators investigating possible accounting fraud at companies selling securities in the United States.

"Chinese companies listed on US exchanges are being held captive in a sovereignty dispute," said Jim Feltman, a senior managing director at Mesirow Financial Consulting in New York.

"This is a step in the process to deregister companies that can't comply with US audit rules.

"They'll have to leave the US marketplace if their auditors cannot - or will not - be responsive to the SEC."

Of about 400 Chinese companies that trade in the US, at least 115 have been audited by the subsidiaries of the Big Four accounting firms, according to data on stocks with market values of at least US$5 million.