By Kara Scannell in New York
US regulators will next week push for a deal that would allow them to inspect auditors based in China in an effort to ease rising investor concerns over the accounting of many Chinese companies.
Officials from the US Securities and Exchange Commission and Public Company Accounting Oversight Board plan to meet counterparts in Beijing to negotiate a deal.
The talks with China?s finance ministry and the China Securities Regulatory Commission will centre on proposals to allow PCAOB inspectors into the country to review auditing firms as required under the Sarbanes-Oxley law.
About 110 auditing firms based in China and Hong Kong are registered with the PCAOB.
The accounting board said the talks aimed to strike a deal that would allow ?joint inspections? of China-based audit firms.
The SEC says it will meet the China regulator to discuss enforcement investigations.
Negotiations over auditor inspections has been going on since 2007. China has traditionally denied US authorities access, citing sovereign issues.
However, accounting controversies at Chinese companies listed in the US have raised concerns over diminished appetite among US investors to back small to midsize China groups that are trying to raise capital to expand their businesses.
James R. Doty, chairman of the PCAOB, said: ?I believe we share a common objective with Chinese regulators to protect investors and safeguard audit quality through our mutual co-operation.?
The board and SEC last year launched reviews looking at companies with stock trading in the US that had most of their business operations overseas.
Many of those companies are based in China and entered the US through reverse mergers, a process whereby they obtained stock listings by acquiring a publicly traded shell company.
Research firms run by short sellers – traders betting on a fall in the value of a group?s shares or securities – have published reports questioning the accounting of several China companies.
Last month, accounting firm BDO resigned as auditor of China Biotics, citing concerns after finding that the signature on a sales contract belonged to a different company from the one supposedly involved in the deal.
It also cited mathematical errors it found in a portion of the group?s interest income statement that management dismissed as clerical mistakes, according to regulatory filings.
The PCAOB also last month rejected the registration of a Hong Kong-based auditor for the first time, citing its inability to inspect the firm?s work.
The SEC has suspended trading in 20 China-based companies after questions about their accounting were raised.
? The Financial Times Limited 2011