Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

U.S. Reaches Key Agreement With Chinese Regulators Over Auditing Access

Author: Dan Brecher

Date: June 13, 2013

Key Contacts

Back

The Public Company Accounting Oversight Board (PCAOB), a nonprofit corporation established by Congress to oversee the audits of public companies, recently announced a critical first step in its efforts to secure audit documents in China. The memorandum of understanding is the product of lengthy negotiations with Chinese regulators over enforcement cooperation.

As we have previously discussed on this Business Law Blog, obtaining documents in China is no easy task for the PCAOB or the Securities and Exchange Commission (SEC). The agencies have faced pushback from both U.S. listed companies based in China and Chinese affiliates of U.S. accounting firms.  The companies argue that providing requested documents would violate strict Chinese secrecy laws.

Last December, the SEC initiated administrative proceedings against the China affiliates of each of the “Big Four” accounting firms and another large U.S. accounting firm for refusing to produce audit work papers and other documents. However, its efforts in court have thus far been largely unsuccessful.

As a result, the latest diplomatic effort with the China Securities Regulatory Commission (CSRC) and the Ministry of Finance of China comes at an opportune time. “Given the global nature of capital markets, the Authorities recognize the need for cooperation to ensure compliance with, and enforcement of, their respective laws and regulations in matters related to the oversight of the auditors subject to their regulatory jurisdictions,” the agreement states.

Under the Memorandum of Understanding on Enforcement Cooperation (MOU), regulators from both countries will assist each other in obtaining materials related to investigations of auditors, which may include:

  • Documents sufficient to identify all audit review or other professional services related to matters set forth in the request for assistance performed by audit firms, including, but not limited to, contracts, engagement letters, or other documents defining the nature and scope of the professional services;
  • Audit work papers or other documents held by audit firms, provided that the documents relate to audit work that is subject to the regulatory jurisdictions of the PCAOB and/or the CSRC and China’s Ministry of Finance; and
  • Documents sufficient to identify firms’ quality control systems including organizational structures, policies adopted and procedures established to provide assurance of compliance with professional standards.

The MOU represents a positive step forward for the PCAOB and the SEC, which will also be granted access to documents provided under the agreement. Of course, it remains to be seen how well the agreement will work in practice, particularly if it leads to widespread delisting or other sanctions against Chinese firms.

If you have any questions about the agreement or would like to discuss the legal issues involved, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
How to Conduct a Fair and Legal Employee Termination in 2025 post image

How to Conduct a Fair and Legal Employee Termination in 2025

Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]

Author: Angela A. Turiano

Link to post with title - "How to Conduct a Fair and Legal Employee Termination in 2025"
Admin Dissolution for Annual Report: What You Need to Know post image

Admin Dissolution for Annual Report: What You Need to Know

While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]

Author: Dan Brecher

Link to post with title - "Admin Dissolution for Annual Report: What You Need to Know"
What Is Antitrust Litigation Law? post image

What Is Antitrust Litigation Law?

Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]

Author: Robert E. Levy

Link to post with title - "What Is Antitrust Litigation Law?"
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!