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* Business groups push Treasury to take on negotiations
* Agreement from May 24 seen as positive, partial step
By Nanette Byrnes and Dena Aubin
June 7 (Reuters) - The Obama administration is under pressure from large corporations and a senior U.S. senator to revisit oversight of Chinese corporate audits at upcoming summit meetings, as disputes persist despite a partial deal on the issue reached in May.
U.S. President Barack Obama is set to meet Friday and Saturday with Chinese President Xi Jinping. Their discussions were likely to focus on other topics, but New York Senator Charles Schumer has urged the two leaders to take up the auditing issue.
"It is in the interests of both U.S. financial markets and Chinese companies seeking to raise money here that investors know they can trust the financial statements of those companies," Schumer said in June 6 letter to U.S. Treasury Secretary Jack Lew ahead of the Obama-Xi summit.
A likelier forum for the issue will come on July 8 at a meeting of senior economic officials, including Lew. The final agenda for these sessions was still being shaped. Business groups want it to include the Chinese auditing issue.
The U.S.-China relationship is vital to both countries, but fraught with tensions, not the least of which involve China's willingness and ability to comply with accounting and financial standards widely accepted across the developed world.
Looming in the background of this weekend's and next month's talks will be a handful of Chinese initial public offerings aiming to hit U.S. stock markets soon.
"At a time when China-based companies are once again seeking to issue securities on U.S. stock exchanges, I urge you and the president to ensure this issue receives serious consideration," Schumer wrote to Lew.
U.S. and Chinese audit regulators have been at an impasse for more than two years over how to oversee auditing of China-based companies that list and trade on U.S. stock exchanges.
Accounting scandals have erupted among many of these businesses and U.S. investors have been burned. The Public Company Accounting Oversight Board (PCAOB), which polices auditors of U.S.-listed corporations, wants to have a closer look at how audit firms review the books of Chinese companies.
But the Chinese government has barred the PCAOB from doing routine inspections in China, citing national sovereignty.
The PCAOB and China on May 24 announced an agreement that will allow U.S. regulators to obtain audit documents for enforcement cases, but will not allow inspections in China.
The PCAOB "has had a half bite of the apple," said U.S. Chamber of Commerce Vice President Tom Quaadman.
Treasury needs to take the next bite by pressing China for an expansion of the PCAOB pact, said Quaadman, on behalf of the chamber, the largest U.S. lobbying group for businesses.
Also pushing for a broader deal are the Big Four global accounting firms and their clients, U.S. multinationals that do business in China. They worry a lack of transparency and a history of accounting problems at Chinese firms could lead to harsher scrutiny of their own Chinese financial statements by the U.S. Securities and Exchange Commission.
PCAOB Chairman Jim Doty described the May 24 deal as a step toward more cooperation with Chinese regulators. Negotiations continue and the next step will be getting access to documents for inspections, he said.
An IPO on Thursday of LightInTheBox Holding Co Ltd - the first U.S.-listed IPO of a Chinese company since November - may have signaled some market confidence in the partial May 24 deal. Shares of online merchant LightInTheBox rose 32 percent in their first two days of trading.
At least five other small Chinese technology companies are considering U.S. IPOs and their outlook may hinge on the ability of the PCAOB and China to seal a broader deal, analysts said.
Formed a decade ago as part of the post-Enron Sarbanes-Oxley corporate auditing reform laws, the PCAOB has a powerful weapon. It can deregister audit firms that fail to comply with its rules. Firms which are not registered with the PCAOB cannot audit U.S. public companies.
Sixteen countries have agreed to allow the PCAOB to review audits done within their borders for U.S.-traded companies, including Germany, Japan, Canada, South Korea and Britain.