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US-Chinese auditing agreement discussed in Beijing

Officials from the U.S. Treasury Department wer ein Beijing recently discussin

China is the largest and fastest-growing challenger to U.S. economic domination, and representatives from the Treasury Department, led by Secretary Tim Geithner, were recently in Beijing to discuss the future of business between the two global powerhouses.

As trade between China and the United States continues to open, one potentially tricky issue on the horizon is U.S. oversight of Chinese audits of companies listed on U.S. exchanges, according to Forbes. The Chinese are reluctant to give up any sovereignty to the United States, but the recent economic turndown, in which questionable accounting and auditing practices played a major role, has spurred regulatory agencies like the Public Company Accounting Oversight Board to insist on stricter controls.

Negotiations are ongoing, but insiders appear optimistic that an agreement will soon be reached, Forbes reported. Unless Chinese auditors receive approval from the PCAOB, the companies they serve could face delisting in U.S. markets under guidelines set by the Securities and Exchange Commission. Both countries have expressed a desire for a single set of accounting standards, according to Forbes.

The ambiguity over U.S./Chinese auditing standards highlights the SEC's own reluctance to issue clear guidance regarding the implementation of International Financial Reporting Standards. The lack of leadership from the United States could cause other major economies to balk on implementing the standards, according to a recent article in AccountingToday.