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State Board Report

June 2013

The Public Company Accounting Oversight Board, the China Securities Regulatory Commission and the Chinese Ministry of Finance have entered into a memorandum of understanding that establishes a framework for the production and exchange of audit documents relevant to investigations in both the U.S. and China. It sets out a mechanism for requesting and receiving documents in furtherance of their investigations.

PCAOB Chairman James R. Doty commented: “We look forward to continued progress with our Chinese counterparts to reach an agreement on cross-border inspections of PCAOB-registered firms as well.” The PCAOB is engaged in continuing discussions to permit joint inspections in China of audit firms that are registered with the PCAOB.

The MOU states: “The Authorities will, within the framework of this MOU, provide each other with the fullest assistance permissible to secure compliance with the respective Laws and Regulations of the Authorities.”

It also states: “A Party may share non-public information obtained in connection with cooperation under this MOU with certain law enforcement or regulatory authorities within its jurisdiction.”

The PCAOB may share such information only with those entities identified in section 105(b)(5)(B) of the Sarbanes-Oxley Act, as amended, which states that these entities “shall maintain such information as confidential and privileged.”

Reuters reported that Deloitte has asked a federal judge to dismiss the SEC’s lawsuit brought against the firm for refusing to produce audit work papers and other documents related to China-based Longtop Financial Technologies, which was being investigated by the SEC (see SBR 6/12).

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