WASHINGTON The chief U.S. audit industry watchdog, sounding cautiously upbeat on a simmering dispute, said on Monday that he hopes talks with Chinese authorities on joint audit inspections will resume early next year.
Public Company Accounting Oversight Board (PCAOB) Chairman James Doty said some resolution to a troublesome standoff over Chinese corporate audits needs to come in 2012.
Speaking on the sidelines of an accounting conference, he highlighted recent Capitol Hill pressure for results, including a letter from Democratic Senator Charles Schumer to the PCAOB.
Doty told Reuters that he and his staff have been in touch with Guo Shuqing, the new head of the China Securities Regulatory Commission. Doty said he hopes by early 2012 a joint inspections protocol can be settled upon with the Chinese.
Financial and accounting issues at several Chinese companies listed on U.S. stock exchanges, some through reverse mergers, have led to investigations, and in some cases auditor resignations and stock de-listings, this year.
No date has been set for another round of meetings between the United States and China, nor a location determined. The last meeting took place in July in Beijing.
Asked whether Chinese concerns about sovereignty and state secrets might yet prevent an agreement, Doty cited other areas where the Chinese already permit foreign inspection, including on defense dealings, pharmaceuticals and steel.
A few audits cannot be that troubling, he said, adding that in exchange, China would get the opportunity to participate in the evolving global system of auditor oversight.
Still an open question is whether the PCAOB would continue to allow Chinese firms to remain registered and work on public company audits if the PCAOB could not inspect those audits.
Asked whether Chinese firms might be deregistered by the PCAOB, Doty said that while talks were ongoing and progress was being made, such ultimatums were not in the cards.
The PCAOB inspects in 37 jurisdictions and will soon begin in the Netherlands as well, an addition announced Monday.
Volatility in the financial markets and global economic troubles are pressuring auditors worldwide, Doty said.
In times like these, managements and companies typically and quite frequently start trying to dress up their financial performance, he told Reuters, leaving auditors to hunt down problems and force corrections.
(Reporting by Nanette Byrnes. Editing by Kevin Drawbaugh and Gerald E. McCormick)