U.S. regulators are planning their first-ever inspection of an audit firm in China under a pilot program, marking a step toward resolution of a stalemate over accounting oversight of Chinese firms listed on U.S. markets.
The inspection is expected to take place this year, subject to final agreements, a spokesman for the Public Company Accounting Oversight Board (PCAOB), the main U.S. audit regulator, told Reuters.
The PCAOB has been seeking access to China for audit inspections for years, following a rash of botched audits that led to massive losses for investors in Chinese shares in the United States. China had balked at granting access for audit inspectors, citing sovereignty concerns.
Under U.S. law, auditors that check the books of U.S.-listed companies must be registered with the PCAOB and open to inspections.
"They've gotten very little here, but they're making progress," said Paul Gillis, an accounting professor at Peking University in Beijing.
"The whole issue is becoming less relevant as these companies flee the U.S. markets to return to China, and that's really the best for all parties," he said.
Chinese companies have been pulling out of the United States and returning home, where share prices had surged before a recent pullback. In the media and internet sectors alone, 17 U.S.-listed Chinese companies have said this year they will go private, spurred by a chance to re-list on Chinese exchanges, according to a report from Mizuho Securities.
The U.S. Securities and Exchange Commission, which regulates U.S. stock markets, has also de-registered dozens of Chinese companies in response to accounting scandals that began surfacing in 2010.
The PCAOB two years ago said China had agreed to grant access to Chinese companies' audit documents for U.S. enforcement actions against auditors.
Regulators from the United States and China committed to the pilot inspection program in talks held in Washington, D.C., the U.S. Treasury Department said in a report.
Senior officials from China and the United States meet annually at the U.S.-China Strategic and Economic Dialogues to work on economic cooperation.
