US will inspect Chinese auditors.

The announcement yesterday represents a breakthrough after a stand-off between Beijing and Washington, which has argued that shoddy audit work contributed to a series of accounting frauds at US-listed Chinese companies. China agreed in August to let the PCAOB examine papers from Chinese auditors, including the local affiliates of the Big Four global accounting firms, but the agency had signalled that it was sceptical about the level of access it would receive. The PCAOB was set up to inspect all accounting firms that audit US-listed companies, regardless of where they are based. « This should not be misconstrued as a clean bill of health for firms in mainland China and Hong Kong».

Inspectors found «numerous» potential deficiencies in the audit work in China, she said, since firms had not previously been held to US standards. The audits inspected included those of state-owned enterprises and companies in other sensitive industries, the PCAOB said. In the run-up to the August deal with the PCAOB, several state-owned groups, including oil producers PetroChina and Sinopec, abandoned US listings. The PCAOB said Chinese authorities had allowed access to all documentation without redacting information, and documents were able to be transferred to the US.

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