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July 6, 2011

US audit regulators push for bilateral agreement with China

US regulators are to meet Chinese authorities to discuss cross-border audit oversight‎ in a push towards a bilateral agreement.

A US Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) delegation will meet their Chinese counterparts next week in an attempt to ease concerns over the audit of Chinese companies listing in the US.

The delegation aims to discuss with China’s Ministry of Finance and the China Securities Regulatory Commission how each country conducts inspections and an agreement that allows for joint inspections of China-based auditing firms registered with the PCAOB.

“This meeting is the commencement of our accelerated efforts with the People’s Republic of China to forge a co-operative resolution to cross-border auditing oversight. I believe we share a common objective with Chinese regulators to protect investors and safeguard audit quality through our mutual cooperation,” PCAOB chairman James Doty said.

Since 2007, the PCAOB has been engaged in discussions with Chinese counterparts regarding a bilateral agreement that would enable the PCAOB to conduct inspections of auditing firms in China.

PCAOB registrants include more than 900 non-US auditing firms from 87 jurisdictions, including 110 firms in China and Hong Kong.

US legislation requires all audit firms to undergo inspections by the PCAOB at least once every three years, regardless of where the public company and the audit firm are located. Until now, the PCAOB has been blocked from conducting inspections of auditing firms in China due to sovereignty concerns raised by Chinese regulators.

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