CSRC preparing to turn over audit documents

The China Securities Regulatory Commission (CSRC) is getting ready to provide US federal regulators with auditing work papers pertaining to a US-listed Chinese company, the China Securities Journal (CSJ) reported Tuesday, citing insiders.

The official newspaper did not specify which company the CSRC was referring to, nor did it provide a timetable for when the materials in question would be furnished.

News of this concession follows months of negotiations and legal maneuvering over the disclosure of documents from China-based firms which audit local companies trading in the US. Investors and regulators in the US began pressing for more scrutiny into the auditing work being done for Chinese firms last year when the US Securities and Exchange Commission (SEC) launched fraud investigations into several Chinese companies following a spat of accounting scandals.

"The CSRC's move is a positive sign that Chinese authorities are making efforts to create a more transparent market," Liu Feng, a supervisor from the Financial Planning Standards Board (China), told the Global Times Tuesday.

"Chinese auditors are obligated to let investors in the US know the real financial situation of their clients trading in the country's market," Liu added.

Auditing firms operating in China have long held back on cooperating with the SEC, saying that they would not share their work papers or related materials without the consent of the Chinese government.

In December 2012, the SEC initiated administrative proceedings against the Chinese subsidiaries of the Big Four accounting firms after they refused to produce documents on US-listed Chinese firms being probed for fraud.

To ease tensions and strengthen cross-border enforcement, the CSRC and the Ministry of Finance (MOF) signed a memorandum of understanding with the Public Company Accounting Oversight Board (PCAOB) in May which would allow the board to obtain working papers and other materials held by China-based auditors. Under the terms of the memo, the MOF and the CSRC would provide documents requested by the PCAOB in order to facilitate fraud inquiries in the US.

"Greater cooperation will help solve some of the disputes between the two countries," Sun Lijian, deputy director of the School of Economics at Fudan University, told the Global Times Tuesday. "Moreover, these latest developments show that Chinese regulators are eager to help homegrown companies improve their image in overseas capital markets."