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SEC and PCAOB Officials Decry Inspection Limitations on China-Based Audit Firms

In a joint statement on the audit quality of companies with operations in emerging markets, SEC Chair Jay Clayton, SEC Chief Accountant Sagar Teotia and the Public Company Accounting Oversight Board ("PCAOB") Chair William D. Duhnke III (collectively, the "officials") decried continuing limitations on the PCAOB's ability to inspect the audit work and practices of PCAOB-registered audit firms in China. The officials stated that the observed limitations extend to the auditing of Hong Kong-based firms, insofar as the operations of their audit clients are located in mainland China.

The officials highlighted the efforts of their respective organizations to improve the quality of financial reporting and audits in emerging markets through discussions with investors, market participants, regulators, industry experts and the four largest U.S. audit firms.

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