To specify the rights and obligations of both parties, a Chinese company listed in the U.S. enters into an auditing services agreement with the domestic and overseas accounting firms that provide auditing services to it. An auditing services agreement usually contains a confidentiality clause, specifying that the accounting firm is obligated to keep the information provided by the client confidential and should not provide auditing working papers and other information to any third party.

　　However, the above non-disclosure obligation is not absolute. Some agreements specify that the provision of appropriate information by an accounting firm to the regulatory authorities is not in breach of the non-disclosure obligation. In particular, some Chinese companies listed in the U.S. also accept that the PCAOB should have the authority to require accounting firms to provide auditing working papers and other appropriate information by specifying this in the auditing services agreement or otherwise entering into a supplementary agreement.

　　Theoretically, the authority of inspection of the PCAOB is a state administrative power in nature and is generally binding on registered accounting firms, while the auditing services agreement is just a contract between private parties and is binding on the contracting parties only. Based on the general principle that “private rights cannot antagonize state powers”， whether or not the contractual auditing services agreement specifies that an accounting firm may provide auditing working papers and other appropriate information to the PCAOB and other overseas regulatory authorities, neither the statutory power of the PCAOB nor the statutory obligation of the accounting firm will be affected in any way.

　　Therefore, to provide for contractual exceptions to the non-disclosure obligation of an accounting firm in the auditing services agreement is not only unnecessary, but might also make the CSRC worry that the Chinese accounting firm would no longer abide by the applicable laws and regulations of the PRC, and be no longer subject to the supervision of the competent authorities of the PRC. As such, the competent authority might further raise an objection to this, and might also suggest Chinese companies listed in the U.S. and appropriate accounting firms amend their auditing services agreement accordingly.