* PCAOB, SEC officials planning Beijing trip
* Ultimate goal is PCAOB inspection authority in China
* 'Meaningful' inspection arrangement seen by year-end
By Clare Baldwin and Nanette Byrnes
NEW YORK, July 5 U.S. regulators will talk to
authorities in Beijing about the oversight of China-based
auditors amid growing concern about a highly publicized string
of alleged accounting scandals.
U.S. audit watchdog PCAOB and the SEC both confirmed
meetings would take place. Neither said when. Bloomberg News
reported from Beijing they would take place on July 11 and 12.
Concern about Chinese companies has risen in the United
States and Canada where stocks have been de-listed, trading has
stopped, share prices have collapsed, auditors have resigned
and regulatory probes have been launched.
The U.S. delegation is expected to include representatives
from the Public Company Accounting Oversight Board (PCAOB) and
the U.S. Securities and Exchange Commission (SEC), including
representation from the Office of the Chief Accountant, PCAOB
board member Lewis Ferguson said late last month.
Talks will focus on the audit oversight process with the
expectation a system will be established for inspecting Chinese
audit firms handling U.S. listings by the end of the year, a
PCAOB spokeswoman confirmed by email at the same time.
Colleen Brennan, the PCAOB's top spokesman, said on Tuesday
by email that progress had been made following a meeting of the
PCAOB and the China Securities Regulatory Commission during the
recent U.S.-China Strategic and Economic Dialogue.
"Both sides have agreed to accelerate efforts, including
undertaking a process for negotiations and engaging in
technical assistance activities, to reach a bilateral agreement
governing cross-border audit oversight," she said.
NOT ONLY CHINA
The PCAOB is considering requiring U.S. auditors who rely
on the work of affiliated firms to disclose the names of those
firms and whether they are open for inspection by the PCAOB,
Ferguson said at a Practising Law Institute event in New York
Companies looking to list on U.S. exchanges are required to
have their books audited by a firm registered with the PCAOB
and inspected by it on a regular basis.
But some companies have been using China-based auditors and
China does not currently allow the PCAOB to inspect the work of
those firms. According to the PCAOB, 28 Hong Kong and
China-based firms which are not inspected by the board audited
financial statements filed with the SEC by 230 U.S. public
companies in 2009 and 2010.
China is not the only country that forbids PCAOB
inspections, but its ban has attracted extra scrutiny amid
widespread allegations of accounting fraud, especially from a
vociferous group of short sellers who have been publishing
reports to back up their allegations of shenanigans.
The accusations began with smaller companies that went
public in the United States by merging with already-listed U.S.
shell companies, but have grown to include companies such as
Longtop Financial Technologies Ltd LFT.N that became public
through an IPO, and larger companies like Sino Forest Corp
TRE.TO in Canada.
There is no existing agreement with Chinese regulators but
Ferguson said he was hopeful they would reach one. The ultimate
goal of the discussions was inspection access in China, he
said, adding that this trip would be a "confidence-building
In other countries, the PCAOB has pursued joint inspections
with local regulators. Recently the board gained the right to
inspect auditors based in Britain and Switzerland.
(Reporting by Clare Baldwin, Dena Aubin and Nanette Byrnes;
Editing by Howard Goller and Matthew Lewis)