It seems the US and the People’s Republic of China have reached a secret agreement regarding US audits of PRC companies as a prerequisite for those companies being listed on US stock exchanges. This putative agreement allows the Public Company Accounting Oversight Board inspectors to travel to Hong Kong or mainland China for inspections, and it’s officially signed by the PCAOB, the PRC’s Securities Regulatory Commission, and the PRC’s Ministry of Finance.
I also have an observation: inspecting audit papers is not the same as auditing the company.
- In what way will the inspectors know that the audit papers are accurate reflections of the audit that was done?
- How much advance notice will be required before access to the audit papers is allowed?
- Will the inspectors be allowed to make notes/copies of the papers and take the notes/copies with them on departure?
- In what way will the inspectors know that all of the audit papers have been made available?
- To which audit papers will access be allowed?
- Via what mechanism will the inspectors know which audit papers to inspect?
- In what way will the inspectors know that all of the subset of audit papers allowed actually have been made available?
There are more, but these will do for a start.
Secret agreement because:
Officials from the US Public Company Accounting Oversight Board and the US Securities and Exchange Commission said they agreed with their Chinese counterparts to not make the language of the deal public.
No coverup there. Not a bit of one.