US Inspectors Seen Getting Good Access to Audits of China Firms

US regulators gained “good access” in their inspection of auditing work done on Chinese companies listed in New York during a seven-week review in Hong Kong, sources have said.

China appears have made a key step forward in resolving a longstanding bilateral dispute, but the sources noted that a broader review of work done by Hong Kong and China-based auditors is still going on.

So, no decision had been taken on whether the dispute could be considered resolved.

Inspectors with the Public Company Accounting Oversight Board (PCAOB) conducting the inspection in Hong Kong gained all the information they requested, one of the sources said.

They were also allowed to print out some documents to more easily review information despite some initial hesitancy from Chinese officials, the source said.

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Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.

The spat dates back more than a decade but it came to head late last year when the US authorities finalised rules that threatened to delist roughly 200 Chinese companies on US stock exchanges.

Resolving the dispute represents a key test of cooperation between Washington and Beijing after years of heightened bilateral tension.

The two sides signed a pact in August aiming to settle the issue, resulting in the seven-week inspection that concluded this month.

At the time, US Securities and Exchange Commission chairman Gary Gensler warned that the PCAOB needed to gain all access required by US law or the threat of delisting would remain.

The sources were not authorised to speak to media and declined to be identified. The PCAOB declined to comment.

The China Securities Regulatory Commission, which has been leading the discussions with the PCAOB, and the Ministry of Finance did not reply to requests for comment.

Jackson Johnson, a former PCAOB inspector and president of Johnson Global Accountancy, an audit quality advisory firm, said the review could take several more months while issues such as quality control and the methodology of Chinese audit firms are examined.

E-commerce giant Alibaba Group Holding and restaurant company Yum China Holdings were among companies whose audit documents were slated for review during the inspection.