The head of PricewaterhouseCoopers, the world's largest accounting and consulting firm, said on Thursday he hoped for progress soon on a U.S.-China auditing oversight deal that could avert a disruption to capital markets.
Officials of all the "Big Four" accounting firms have been talking with regulators in China and the United States trying to encourage an agreement, PwC's global chair Dennis Nally told Reuters in an interview.
"I hope to see some real progress over the next several months," he said.
Regulators in the United States have for years sought access in China to inspect audit firms that check the books of China-based companies listed on U.S. exchanges. China has resisted allowing U.S. audit inspectors on its soil, citing sovereignty concerns.
A growing number of accounting scandals at Chinese companies listed in the United States has intensified pressure on U.S. regulators to take action.
"The (audit) profession is right in the middle of this, which is not good for the China markets or the U.S. markets," Nally said.
The head of the Public Company Accounting Oversight Board, which regulates U.S. auditors, told Reuters this week that China-based auditors could be barred from checking the books of U.S.-listed firms if an agreement is not reached next year.
PCAOB Chairman James Doty told Reuters no deal was in sight, although U.S. inspectors will start observing inspections by their counterparts in China before the end of this year.
Accounting firms that check the books of firms listing in the United States must be registered with the PCAOB and be open to inspections. The PCAOB has the authority to deregister firms it cannot inspect.
Pulling the Chinese audit firms' registrations would be "very disruptive" to the capital markets, Nally said.
"That basically means those Chinese companies have to delist (from U.S. exchanges) because they don't have an audit," Nally said. China might respond in kind and prevent U.S. companies from listing there, he said.
Protocols the PCAOB has created for joint inspections with regulators in other parts of the world could form the basis for an agreement with China, Nally said.
China is a key market for the Big Four accounting and consulting firms. PwC's revenues in China grew by 14 percent in fiscal 2012, nearly matching the 15 percent growth in the United States, the firm said in its annual revenue release on Thursday.
The Big Four firms, which also include Deloitte , Ernst & Young and KPMG , audit many of the China-based companies listed on U.S. exchanges, as well as the Chinese operations of multinational companies. Those multinationals could also lose auditors for their Chinese operations if no agreement is reached.
(Editing by Howard Goller and Gunna Dickson)