U.S. and Chinese regulators recently met in Beijing to discuss audit oversight cooperation. Those meetings are of particular interest in view of the questions which have been raised in recent months regarding the financial statements of Chinese issuers whose shares are traded in U.S. markets. Those issues have sparked a rash of class action suits (here) as well as an investigation by the SEC.
The Sino-U.S. Symposium on Audit Oversight was attended by officials of the China Securities Regulatory Commission or CSRC, the Chinese Ministry of Finance or MOF, the Public Company Accounting Oversight Board and the Securities and Exchange Commission. This meeting is an outgrowth of the third U.S. — China Strategic and Economic dialogue.
The meetings focused on developing an effective cross-boarder audit oversight system in the near future to ensure market integrity and investor protection. Such a system would permit the PCAOB to carry out its obligations under the Sarbanes Oxley Act and conduct the required periodic inspections of Board registered auditors of China based issuers.
During the meetings the PCAOB representatives, lead by Board member Lewis Ferguson, gave detailed presentations about the Board’s operations and its audit inspection process. Board representatives, along with those from the SEC, explained how their inspection process interacts with foreign regulators. Similarly, officials from the CSRC and the MOF provided an overview of the audit and accounting oversight framework for China’s capital markets along with supervision arrangements and inspection mythology for accounting and auditing firms.
The U.S. delegation invited the CSRC and the MOF to send delegates to Washington, D.C. to have further discussions.
No agreements were reached during the meetings. This means that the PCAOB still cannot conduct inspections of U.S. related audit work by PCAOB registered firms in the Peoples Republic of China. Earlier this year the Board issued a warning regarding issuers which are the product of Chinese reverse mergers (here).
Program: Current Trends in FCPA Enforcement, August 17, 2011, Live in Menlo Park, CA, and webcast nationally. The program link is here.