BACK IN AUGUST, US accounting watchdog chief James Doty said he was looking forward to a visit from his Chinese counterparts in October.
So why did Chinese regulators and the Ministry of Finance cancel on him, and when will Doty get to roll out the red (and yellow) carpet?
The meeting was to follow on from accounting watchdog the PCAOB's visit to Beijing this summer, when Doty and co went to talk up the case for joint US-China audit oversight.
Its outcome was a little uncertain; the PCAOB's strongest line was that both regulators "share the view that increasing cooperation on cross-border audit oversight will help improve the quality of auditing and accounting information of public companies".
Last month's meeting was supposed to cement this wobbly accord, but Accountancy Age understands China pulled out shortly beforehand and has ceased talks with its US counterparts.
US Securities and Exchange Commission activities might have something to do with this.
The October meeting was to bring together the SEC, PCAOB and China's Securities Regulatory Commission.
However, in September, the SEC ran out of patience with Deloitte Shanghai over an alleged fraud by one of its clients, Longtop Financial Technologies.
With Deloitte stubbornly refusing to hand over relevant documents after it resigned as Longtop auditor, the SEC issued a subpoena in May and gave the firm until 8 July to comply. It did not.
The regulator then threatened to drag Deloitte to court. Soon after, China's Ministry of Finance and CSRC cancelled their trip to Washington.
Doty told a Reuters reporter leadership changes at the CSRC might have been behind the volte-face, but it is much more likely the SEC's aggressive stance on Deloitte has given China cold feet.
Chinese regulators remain close-lipped about the whole affair. When Deloitte asked for guidance on the SEC's request, the Ministry of Finance and state secrets bureau did not respond.
This is not unusual for a government that prefers to avoid looking obstructive, according to China accounting blogger and visiting professor at Peking University, Paul Gillis.
Nor is it easy to contact the CSRC directly and ask them, as the regulator provides only a fax number and an email address that doesn't work.
Joint audit oversight seems to be at an impasse, and Doty's pronouncements are becoming increasingly hard-line.
In August, he placidly told Accountancy Age market pressures should be enough to nudge China into agreement, saying the "collateral consequences" of opting out will be too great.
Last week he insisted: "We are not talking about something that should happen three years from now. It needs to happen now," suggesting the US is fed up of courting Chinese cooperation.
Apparently stung by Doty's fighting words, Zhou Qinye, vice-general manager of the Shanghai Stock Exchange, has urged US-listed Chinese companies to "de-list and come back home", saying Chinese and Hong Kong stock exchanges would welcome them.
However, Gillis argued domestic markets "are not ready for this" and cannot provide the kind of capital companies need.
Instead, he called on the Chinese government to allow companies to list directly overseas. Currently only the largest state-owned enterprises can do this, with smaller peers structured into offshore companies registered in places like the Cayman Islands and British Virgin Isles.
Allowing all companies to list directly would bring them under the jurisdiction of the Ministry of Finance and CSRC and improve regulatory oversight, Gillis claimed.
The current system places companies beyond the reach of both US and Chinese regulators, and has led to an oversight blind spot and related problems on US stock markets.
Chinese companies joining US exchanges often list via a reverse merger. This process is cheaper and subject to minimal due diligence, leaving investors at risk of fraud.
The problem is compounded by China's refusal to let the PCAOB examine audits of US-listed companies, which brings us back to October's cancelled meeting and the apparent suspension of talks between the regulators.
China is backtracking on its baby-steps towards joint oversight and the PCAOB is looking increasingly belligerent. This could not have come at a worse time, as the US is gearing up for elections and "China bashing" is increasingly likely.
A controversial bill designed to punish China for artificially preventing its currency from appreciating was passed in the Senate last month, prompting dire warnings from Beijing about strangulation of the world economy.
Against this backdrop, reaching an agreement on joint audit oversight will be tough, and significant softening will be necessary on both sides if regulators are to reach a constructive compromise.
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