The US Public Company Accounting Oversight Board (PCAOB) has entered into an agreement with its Chinese counterpart, the China Securities Regulatory Commission (CSRC) and the Ministry of Finance (MoF) which will enable mutual access to audit papers of firms in China and the US that that audit companies across both jurisdictions.

The PCAOB has been requesting this access over several years, arguing that it is crucial as it provides a mechanism for parties to request and receive assistance from each other in obtaining documents and information in furtherance of their investigative duties.

Currently, the new enforcement agreement would only be applicable to auditors, and does not extend to companies who actually commit accounting fraud.

In December, the US Securities and Exchange Commission charged the Chinese affiliates of Deloitte, KPMG, PwC, BDO and Ernst & Young for securities violations over their refusal to produce documents requested for an SEC investigation.

The firms insisted that handing over their audit working papers would mean they would have to contravene China's state secrets law.

'This agreement with China is an important step toward cross-border enforcement cooperation that is necessary to protect the interests of investors in US capital markets,' said PCAOB Chairman James R. Doty.

'We look forward to continued progress with our Chinese counterparts to reach an agreement on cross-border inspections of PCAOB-registered firms as well,' he said.

In addition to developing the Memorandum of Understanding (MoU), the PCAOB has been engaged in continuing discussions with the CSRC and MoF to permit joint inspections in China of audit firms that are registered with the PCAOB and audit Chinese companies that trade on US exchanges.

The agreement now brings approximately 47 audit firms in China, registered with the PCAOB, under more direct scrutiny.