HONG KONG/WASHINGTON, Nov 16 (Reuters) – U.S. regulators have been granted “good access” in their review of audit work carried out on Chinese companies listed in New York during a seven-week inspection, four said sources familiar with the matter – a key step forward in resolving a long-standing bilateral dispute.
The sources, however, warned that the broader review of the work carried out by auditors based in Hong Kong and China was ongoing and that no decision had been made on whether the dispute could be considered over. .
Inspectors from the Public Company Accounting Oversight Board (PCAOB) carrying out the inspection in Hong Kong obtained all the information they requested, one of the sources said. They were also allowed to print some documents to more easily review the information despite some initial hesitation from Chinese officials, the source said.
Chinese authorities have long been reluctant to let foreign regulators inspect local accounting firms, citing national security concerns.
The row dates back more than a decade, but it erupted late last year when US officials finalized rules that threatened to pull about 200 Chinese companies from 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 aimed at settling the issue, culminating in the seven-week inspection that ended this month. At the time, U.S. Securities and Exchange Commission Chairman Gary Gensler warned that the PCAOB must obtain all access required by U.S. law or the threat of delisting would persist.
The sources were not authorized to speak to the media and declined to be identified. The PCAOB declined to comment.
The China Securities Regulatory Commission, which led the discussions with the PCAOB, and the Ministry of Finance did not respond to requests for comment.
Jackson Johnson, a former PCAOB inspector and president of Johnson Global Accountancy, an audit quality consultancy, said the review could take several more months while issues such as audit firm quality control and methodology ‘Chinese audit are examined.
E-commerce giant Alibaba Group Holding (9988.HK) and catering company Yum China Holdings Inc (9987.HK) were among the companies whose audit documents were to be reviewed during the inspection, Reuters reported in August.
Reporting by Xie Yu and Julie Zhu in Hong Kong, Chris Prentice in Washington; Editing by Sumeet Chatterjee and Edwina Gibbs
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