U.S. and Chinese officials have held discussions on an agreement that would allow the American audit regulator to review the books of Chinese companies listed on U.S. stock exchanges, according to sources familiar with the matter. China’s securities regulator and the United States’ audit regulator have stepped up talks this year on joint inspections of accounting firms overseen by both organizations, said the sources. The U.S. Public Company Accounting Oversight Board (PCAOB) has agreements with more than 20 foreign regulators to conduct such inspections, but negotiations with China have faltered in the past. To date, China hasn’t offered solutions consistent with the PCAOB’s core principles including the ability to regularly conduct inspections and select specific engagements and violations to be examined, as well as access to firm personnel and information deemed relevant, said the watchdog’s chairman, William Duhnke, in response to a request for comment. Chinese companies with a combined market capitalization of more than US$1 trillion are listed on U.S. exchanges, including technology giants Alibaba Group Holding Ltd. and Baidu Inc. Earlier this year, U.S. lawmakers introduced a bill proposing the de-listing of Chinese firms that don’t open their books to U.S. regulators. The conflict over public firm audits first attracted attention about a decade ago when Chinese firms were accused of acquiring dormant U.S.-listed firms as a way to access markets without the usual regulatory scrutiny. The 2002 Sarbanes-Oxley Act, which created the PCAOB, gives the non-profit corporation the power to inspect any auditor who examines the financial statements of firms that trade in U.S. markets, including overseas audit firms. (SD-Agencies) |