China Audits Littered with Deficiencies, U.S. Accounting Watchdog Finds

A U.S. accounting watchdog found unacceptable deficiencies in audits of U.S.-listed Chinese companies performed by KPMG in China and PricewaterhouseCoopers in Hong Kong, the government agency said on Wednesday, Reuters reported. The U.S. Public Company Accounting Oversight Board (PCAOB)published the findings of its inspections after gaining access to Chinese company auditors' records for the first time last year following more than a decade of negotiations with Chinese authorities. That access kept roughly 200 China-based public companies from potentially being kicked off U.S. stock exchanges. The deficiencies were so great that auditors failed to obtain enough evidence to substantiate companies' financial statements, PCAOB Chair Erica Williams told reporters on Wednesday. The firms, two of the so-called "Big Four" in global accounting, represent 40% of the market share of U.S.-listed companies audited by Hong Kong and mainland China firms, she said. PricewaterhouseCoopers (PwC) in Hong Kong said it is working with the PCAOB to address issues raised and noted the inspection report marks an important milestone for U.S. and Chinese cooperation. KPMG Huazhen in China said in a statement it has taken steps to address the issues the PCAOB had found. Read more.