China, U.S. Reach Accord for Sharing Auditors’ Records
China agreed to give a U.S. regulator access to documents from Chinese accounting firms, moving toward a resolution of a dispute that could have pushed the country’s companies to stop trading on U.S. markets.
The Public Company Accounting Oversight Board, the China Securities Regulatory Commission and China’s Ministry of Finance signed the agreement May 7, the ministry said in a statement on its website today. The deal is a step toward resolving other disputes including one with the U.S. Securities and Exchange Commission, PCAOB Chairman James Doty was quoted as saying by the Wall Street Journal, which reported the agreement earlier today.
The SEC last year accused affiliates of the world’s top four auditing firms of withholding documents from investigators probing potential fraud by China-based companies. Auditors that don’t comply with the regulator’s demands face temporary or permanent deregistration in the U.S., according to the rule under which the proceedings were brought, meaning they wouldn’t be able to audit U.S.-listed companies.
Deloitte Touche Tohmatsu CPA Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen and and PricewaterhouseCoopers Zhong Tian CPAs Ltd. refused to cooperate with accounting investigations into nine companies whose securities are traded in the U.S., the SEC said in an administrative order in December. BDO China Dahua Co. was also named by the SEC in the action.
The auditors had said Chinese law prevented them from meeting the SEC’s demands.
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