Statement on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong

This agreement announced today brings specificity and accountability to effectuate Congress’s intent. It provides the standards against which to judge whether auditors of Chinese issuers have complied with the requirements of U.S. law, including PCAOB auditing standards. I thank Congress for their attention to these important matters. In particular, Chinese authorities have committed to four critical items:

First, in accordance with the Sarbanes-Oxley Act, the PCAOB has independent discretion to select any issuer audits for inspection or investigation;

Second, the PCAOB gets direct access to interview or take testimony from all personnel of the audit firms whose issuer engagements are being inspected or investigated;

Third, the PCAOB has the unfettered ability to transfer information to the SEC, in accordance with the Sarbanes-Oxley Act; and

Fourth, PCAOB inspectors can see complete audit work papers without any redactions. On this last item, the PCAOB was able to establish view only procedures — as it has done in the past with certain other jurisdictions — for targeted pieces of information (for example, personally identifiable information).

Source: SEC.gov | Statement on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong