Sharing Audit Papers Across Borders

Incremental Progress

In May 2013, the US Public Company Accounting Oversight Board ("PCAOB"), the China Securities Regulatory Commission ("CSRC") and the Chinese Ministry of Finance ("MOF") signed an MOU to exchange information necessary to secure compliance with securities laws, including certain audit requirements, in China and the US.

The MOU was a first step toward resolving an impasse regarding oversight by the PCAOB of auditors of Chinese US-listed companies. Among other things, the PCAOB is empowered to force disclosure of audit working papers, and to inspect the operations of auditors it oversees. However, auditors for a number of US-listed Chinese companies resisted disclosure of their working papers. They asserted that the working papers were protected under Chinese law and they could not disclose them to the US authorities without risking sanctions in China.