US audit watchdog hopes for China deal in 2012

THE US AUDIT watchdog has said it must agree a deal with Chinese regulators on joint audit inspections before the end of the year.

The Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC) are currently trying to hash out an agreement on joint audit inspections with the Chinese.

The PCAOB, which was created to polic auditors following the collapse of Enron, has so far been unable to grant its inspectors access to audit reports relating to Chinese businesses listed in the US.

James Doty, (pictured) chairman of the PCAOB, said there were 36 Chinese-based auditors issuing audit opinions but “have not performed the basic obligations,” at a recent press conference reports.

“I’m confident of only one thing… it is in their interest to get to joint inspections. We will not be in a position to go forward and do what we should without some agreement,” Doty said.

“If we are not inspecting in the fall in China, I am not optimistic about it.”

Last year several Chinese companies were de-listed from in the US due to questionable accounting rows with auditors, while the SEC issued a warning on the issue.

Representatives from the SEC and PCAOB travelled to China last July to discuss a solution to the problem. Chinese representatives were due to meet in the US in October to continue talks, however, the trip was cancelled.

The press conference followed on from a vote by SEC members to increase the PCAOB’s 2012 budget 11% to $227.7m (£148.5m), from $204.4m.

The PCAOB is currently considering restricting the length of time an audit firm can work with a business. Theses changes could break up audit relationships that have lasted more than a century with some businesses.

Related reading