The current China hot button appears to be a series of
meetings between representatives of the Securities and Exchange Commission, the
Public Company Accounting Oversight Board, and their counterparts in China. The
hope is to convince the PRC government to allow the US regulators to inspect
the audits and work papers generated by Chinese auditing firms, and to be able
to subpoena their Chinese clients for information. These meetings, which are
deemed "private," are taking place today and tomorrow.
Advance reports that I have read indicate that the door
may open slightly for some review, but that it is likely to be minimal and not
sufficient for the US guys to feel they have full transparency. Apparently,
this type of access is not technically allowed under China law, according to
It is clear the PCAOB does not wish to create a potential
international incident by banning China-based auditors from auditing US public
companies. But they could end up in a difficult position if they are really
unable to discern whether Chinese auditors of US public companies are
doing their job properly. Stay tuned.
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