WASHINGTON, April 6 (Reuters) - The U.S. auditing watchdog is working with securities regulators in order to inspect the audits of American public companies based in China, an area that is the focus of an ongoing probe by the Securities and Exchange Commission.
Public Company Accounting Oversight Board Chairman James Doty revealed to lawmakers on Wednesday that his board has "initiatives" under way to gain access to auditing firms, although he did not elaborate on what they are.
"We are working with the SEC," Doty told a panel of the Senate Banking Committee. "You can expect some initiatives coming out in the summer and fall."
The SEC is probing accounting deficiencies at private foreign companies that merge with U.S. public shell companies in order to list on exchanges and raise capital.
These reverse mergers have allowed the companies to bypass the due diligence of an initial public offering.
Many of these companies, but not all, have been based in China and the SEC has taken enforcement action against some of them for accounting deficiencies in areas such as revenue recognition. The SEC has been looking to ensure that these companies' books are in line with U.S. standards after some of them hired unknown auditing firms.
The PCAOB, which was created by the Sarbanes Oxley Act to inspect firms that audit public companies, has been unable to access the companies in China responsible for some of the audits.
That has frustrated the nonprofit corporation, which issued a report earlier this month about the growing trend of reverse mergers involving Chinese companies.
(Reporting by Sarah N. Lynch)