U.S. audit watchdog nearing China deal to inspect audit firms
WASHINGTON Feb 5 (Reuters) - The top U.S. audit watchdog said on Wednesday he believes the United States and China are close to striking a deal that would allow Washington to inspect the audit work of accounting firms in China.
"I am also optimistic that we will be able, during 2014, to sign a long-sought agreement to inspect the audit work of PCAOB-registered firms based in China," Jim Doty, the chairman of the Public Company Accounting Oversight Board, said in prepared remarks to the Securities and Exchange Commission.
Doty is testifying before U.S. securities regulators to discuss his board's budget and policy initiatives for 2014.
The PCAOB and the SEC have both been struggling for years to gain access to work papers at audit firms in China, including units of the "Big Four" firms, amid a rash of accounting scandals at U.S.-listed China-based companies.
They have argued they need the documents, both to help investigate possible fraud at U.S.-listed companies, and also to inspect the quality of the auditors' work.
But PricewaterhouseCoopers, KPMG, Deloitte, Ernst & Young, and other accounting firms have refused to share any paperwork, citing Chinese secrecy laws.
The SEC eventually filed an enforcement action against the Chinese units of the Big Four in late 2012, saying they were violating U.S. laws by failing to hand over the audit workpapers.
The PCAOB has continued talks with the Chinese and in May 2013 were able to strike a deal to get access to audit work in connection with investigations.
That deal, however, did not give the PCAOB any ability to conduct routine inspections of the audit firms - a key responsibility of the board to make ensure the quality of the work.
Last month, the SEC prevailed in its case against the Big Four, after an SEC administrative law judge sided with the agency and ruled the audit firms were intentionally withholding documents.
The judge suspended the firms from practicing in the United States for six months, but the suspensions will not go into effect until the appeals process is exhausted.
Many observers had said they feared the ruling by the judge could hurt the progress the PCAOB had made so far in its talks with the Chinese.
Doty did not discuss the ruling in his prepared remarks or say whether it might hinder his diplomatic efforts.
- Alabama man gets $1,000 in police settlement, his lawyers get $459,000
- Man arrested after jumping White House fence, causing lockdown
- Probe: Athletes took fake classes at University of North Carolina
- Attack on parliament, killing of soldier stun Canada's capital |
- A Minute With: Shailene Woodley on teen sex, violence and Marvel