Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Last week it was announced that the US and China had reached an agreement allowing the US public

company Accounting Oversight Board,

which is known as the PCAOB, access to audits of Chinese companies that are listed on US

exchanges. This deal would halt the threatened delisting of around 200 Chinese stocks that

are listed on US exchanges right now.

Now, this agreement is not really that new.

China had agreed back in 2013 after years of negotiations to allow the PCAOB to inspect

the audit work of Chinese companies whose securities traded in the United States.

But this agreement then collapsed when US auditors actually travel to China to check the

accounts of a large tech company and were stonewalled by regulators.

So now almost 10 years later, US officials along with Chinese companies and people who own Chinese shares, they're all

hoping that the new agreement will produce a different outcome. There aren't a lot of details

available right now, but the agreement was a rare and somewhat surprising concession from the

Chinese government at a time when political tensions are quite high.

The deal is apparently based on the original deal from 2013. The press is reporting that

auditors, the majority of whom are the Chinese arms of Big Four accountants, will transfer

the company's financial working papers to Hong Kong where

PCAOB officials will be able to inspect them.

Okay, so what is the PCAOB, I hear you ask?

Well, it's a US government agency that was established by the Sarbanes-Oxley Act in 2002 to oversee the audits of public companies

and other securities issuers. The Sarbanes-Oxley Act required that auditors of US public companies

...