U.S. audit regulator reaches deal with China on document access
By Dena Aubin and Sarah N. Lynch
NEW YORK (Reuters) - U.S. regulators will get access to Chinese companies' audit documents under a deal announced on Friday, opening the way to probes of bungled audits after a two-year stand-off between China and the United States.
The nonbinding deal is only a partial victory for the United States, which has been blocked from investigating accounting scandals at dozens of Chinese companies listed on U.S. stock exchanges.
It applies only to enforcement cases against auditors, not against China-based companies suspected of accounting fraud. And it does not allow U.S. regulators to do on-the-ground inspections of auditors in China - a key part of efforts to combat fraud.
"This deal would allow investors to find out after the fact how they were defrauded but would do nothing to prevent the fraud in the first place," said U.S. Senator Charles E. Schumer.
If a more complete agreement cannot be quickly reached, the U.S. Securities and Exchange Commission should consider de-registering Chinese firms, he said.
The pact was the result of more than two years of negotiations between the Public Company Accounting Oversight Board, the U.S. regulator for audit firms, and its counterparts in China - the China Securities Regulatory Commission and the Ministry of Finance.
Effective on May 10, it calls for the PCAOB to cooperate with the CSRC and the Ministry of Finance on the exchange of documents.
Any nonpublic documents exchanged will be kept confidential, according to a memorandum of understanding between the agencies. Continued...