There is a higher risk of fraud in China and
greater dialogue between regulators is needed, according to KPMG
International chairman Michael Andrew.

“We are seeing a higher instance of
fraudulent-like-type activity in some of the Chinese markets then
we would in other corporate markets,” he said in a Reuters TV

Andrew said there should be more dialogue
between the US and Chinese authorities when it comes to overseeing
Chinese companies listed on the US stock exchange. “The two
regulators should try and work out whether there’s some basis of
mutual exchange of information, joint inspections, but some way in
which they can both contribute. At the moment they seem polarised
of each wanting to do it independently of the other,” Andrew

Andrew also said China is very much like any
other emerging economy.

“It is on a journey, it’s increasingly
improving its corporate governance and financial reporting
systems”, he said. “It’ll take 10 years or a decade to really get
up what I’d call a Western standard.”

Andrew said KPMG has been learning about
changing some of its audit procedures when dealing with China.

“Getting an independent bank confirmation, for
example, in China is not a question of just sending a letter off
and hoping that you’ll get something back. We now independently
take steps to make sure that we get directly into those accounts
without having to rely upon third party intermediaries,” he

Lately, pressure has been mounting on the US
Public Company Oversight Board and its Chinese counterpart to work
towards enabling cross-border inspections. In the past year,
several Chinese companies listed on US stock markets, including
Longtop, have been discovered with accounting irregularities.