U.S., China in pact on audit observation, not inspection

Oct 9 (Reuters) - In a step toward resolving U.S.-China tensions over corporate auditing, U.S. regulators said on Tuesday they have finalized an agreement to let them begin observing corporate audits in China.

The pact, announced by the Public Company Accounting Oversight Board, an auditing watchdog based in Washington, D.C., fell short of the full access the board wants to inspect and examine Chinese audits of U.S.-listed corporations.

"The PCAOB and Chinese authorities have signed an agreement to proceed with observational visits. We expect them to take place within the next couple of months," said PCAOB spokeswoman Colleen Brennan.

U.S. regulators want access in China to inspect audit companies that check the books of China-based companies listed on U.S. exchanges, but China has resisted, citing sovereignty concerns.

PCAOB Chairman James Doty had repeatedly said that a plan for such inspections had to be in place by the end of this year.

In the past 18 months, accounting issues have arisen over a number of U.S.-listed Chinese companies, leading some companies to de-list from U.S. exchanges.

Paul Gillis, a professor at Peking University's Guanghua School of Management, called Tuesday's deal "a face saving way to kick the can down the road," arguing the PCAOB might decide to extend its year-end deadline for a full inspection deal.

(Reporting by Nanette Byrnes; Editing by Kevin Drawbaugh)

((nanette.byrnes@thomsonreuters.com)(347 844 1054, @nanettebyrnes))