Accounting regulators in the United States and China announced Friday in Beijing that they had reached an understanding that could give U.S. fraud investigators access to work papers of Chinese audit firms. Until now, U.S. efforts to see such papers have been rejected.
The memorandum of understanding was signed by the China Securities Regulatory Commission and the Ministry of Finance for China, and by the Public Company Accounting Oversight Board for the United States.
“This agreement withChina is an important step toward cross-border enforcement cooperation that is necessary to protect the interests of investors in U.S. capital markets,” said James R. Doty, the chairman of the U.S. group.
Whether the agreement will result in more cooperation remains to be seen, however. China retained the right to reject requests if they violated Chinese law or “essential national interest.”
In addition, the agreement covers only enforcement actions, not routine inspections of audit firms.
In an interview, Doty called the agreement “the culmination of years of effort” and voiced hope that progress could be made this year on arranging joint inspections of Chinese audit firms by the two countries. He said it could lead to cooperation that would be equal to that now provided by European authorities.
Under the Sarbanes-Oxley Act passed in 2002, accounting firms that are involved in the auditing of companies whose securities are sold to the public in the United States must register with the U.S. board and submit to inspections by it. Many Chinese firms have registered, but no inspections have taken place.
Business, Pages 32 on 05/25/2013