PCAOB eyes breakthrough on China

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Has there been a breakthrough in the troubling impasse between the Public Company Accounting Oversight Board (PCAOB) and regulators in China?

There have been a lot of behind the scenes improvements in a relationship that hit the rocks a few years ago over the SEC's inspection rights when it comes to the Chinese subsidiaries of big U.S. auditors. Reuters reports that the relationship has now improved to the point that "U.S. officials for the first time have completed a round of observations in China of inspections of auditors by that country's regulators, and talks are expected by year-end between Chinese and U.S. officials on access to audit documents, a key aspect of the auditor regulation process."

PCAOB chairman James Doty told the news agency that obstacles remain but that the upcoming talks could result in a "major breakthrough."

The looming breakthrough comes at a time when numerous accounting scandals at Chinese companies that trade as ADRs in the U.S. have raised concerns. The PCAOB clearly has an interest in pursuing investigations, but they have been stymied by the Chinese regulators, who have put U.S. audit units in China in a tough spot.

At this point, the situation is looking better, as the observations represent a solid first step, but it will be a long time before the PCAOB gets the kind of access it needs. This is perhaps all part of long choreographed dance that might strike some as a form of polite obfuscation. Still, I'm hoping the expected "breakthrough" comes soon.

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