The Public Company Accounting Oversight Board (PCAOB) moved closer to having more access to audits of U.S. listed companies in China. The auditing overseer made an agreement with the Chinese government to have “observational visits in China,” according to a PCAOB spokesperson this week.

The agreement, however, is deemed a “staff level agreement” as opposed to a more formal linkage. But it’s a start in chipping away at the disagreements the United States and China have had over U.S. regulatory access to audits. So far, just one visit has been arranged over the next couple of months, the board’s spokesperson said. Previously, China had refused any U.S. regulator inspections of Chinese audit firms that audited U.S. listed companies in China.

Document transparency in offshore locations is an important issue for the PCAOB. “We are all aware of notorious examples of frauds directed by corporate headquarters but perpetrated in remote locations, beyond the expected gaze of auditors and regulators,” James Doty, the oversight board’s chairman, said in a speech in London earlier this month.

The Securities and Exchange Commission also ranks cross-border audit-document access high on its agenda, working with the China Securities Regulatory Commission in achieving greater transparency. But the SEC and China have come to loggerheads over China’s insistence that more access to audit documents would breach its sovereign authority.

One notable audit case pitted Deloitte Touche Tohmatsu’s Shanghai unit against the SEC and Chinese regulators, resulting in the SEC having to subpoena Deloitte last year for the audit documentation. The firm’s former client, software consulting firm Longtop Financial Technologies Ltd. of Hong Kong, failed to provide annual reports and made false statements concerning its financial records for years, which started the SEC investigations. Deloitte has since resigned as the company’s auditor.

Deloitte, for its part, says geopolitical issues in general may be at the core of cross-border audit disagreements with China. “Frankly, in our view, this is fundamentally a dispute between China and the U.S.,”  and the solution “needs to be diplomatically attained,” Deloitte CEO Barry Salzberg told  CFO. “We hope this dispute can be fundamentally resolved in a diplomatic way pretty soon.”

Until then, Deloitte plans to operate in a business-as-usual fashion in China. “Our objective is to serve our clients well — deliver services to multinational companies and local companies that operate in China with the highest level of quality,” says Salzberg.

But it will proceed with caution. As Salzberg notes, Deloitte plans to do the best it can to operate in “an environment [in which] depending upon what you do, you are violating one of those sovereign laws.”

Deloitte’s audit unit, Audit & Enterprise Risk Services, grew by 6% during the fiscal year 2012. Across all of its business lines, the firm’s Asia Pacific region grew by 16.3% for that year, making the area its fastest-growing region.

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