Posted January 13, 2011 1:28PM PST

The Public Company Accounting Oversight Board (PCAOB) said it is conducting investigations of audit firms doing work in China, including firms that have done work on behalf of companies that have utilized reverse mergers.

The PCAOB issued an Audit Practice Alert in July calling into question the increase of U.S. accounting firms taking contracts to conduct audits of companies operating overseas. The alert specifically cited firms doing work for companies operating in China and going public via reverse mergers in the U.S.

“Since the Board’s July 12th alert, the PCAOB Division of Enforcement and Investigations has commenced additional investigations and inquiries relating to audits by certain U.S. audit firms of issuers whose operations are in China, and is coordinating its enforcement efforts with the” Securities and Exchange Commission, said PCAOB Director of Enforcement and Investigations Claudius B. Modesti in an email to The Reverse Merger Wire today.

The PCAOB has been unsuccessful in gaining access to inspect audit firms in China.

“Our inspectors continue to raise concerns in our inspections of certain U.S. audit firms regarding their audits of issuers either located in China or that have operations in China,” said Colleen Brennan, director of public affairs for the PCAOB, in an email.

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