The Public Company Accounting Oversight Board is warning auditors they need to do more than slap a U.S. opinion on an overseas audit report if they want to remain in the good graces of audit regulators.

The PCAOB published a staff audit practice alert based on something disturbing noticed lately while inspecting U.S. firms registered to audit publicly held companies in the United States. Inspectors are finding cases where U.S. audit firms are providing opinions for overseas companies, especially companies operating in China, even though the majority of the audit work was done by firms or individuals outside the United States. The PCAOB said in most cases, the China-based companies are trading in the United States by executing reverse mergers with U.S. shell companies.

Wayne Carnall, a chief accountant at the Securities and Exchange Commission, raised a red flag on the issue at an April meeting of the PCAOB’s Standing Advisory Group. He said the staff sees hundreds of cases where small companies with virtually all of their operations in China are filing financial statements with U.S. audit opinions where the majority of the audit work was done by someone other than the audit firm providing the opinion.

“You look at the size of the firm and the staff involved, and you question whether any one of those people on staff can speak Mandarin or Cantonese,” he said. “It becomes an issue of who is the principal auditor? Who is doing the underlying audit work? This is not a rare situation.”

The practice alert reminds registered firms of what they are expected to do when using the work of other firms or individuals to perform audit procedures. It also reminds them that anyone they engage from outside their own firm to help with audit work is governed by the same PCAOB standards as staff internal to the audit firm. The alert says the PCAOB will have questions about audit reports where there’s no evidence anyone from the U.S. firm traveled to China or helped plan, perform, supervise, or review the audit.

Gaylen Hansen, a partner with Colorado regional firm Ehrhardt Keefe Steiner & Hottman and a member of the PCAOB’s SAG, said he doesn’t see any connection between the alert focused on reporting emerging from China and the PCAOB’s difficulty in inspecting China-based audit firms that are registered with the PCAOB.

“There are a whole bunch of countries listed on the PCAOB’s Website where that have the same problem (inspecting U.S. registered firms located overseas),” said Hansen. “Maybe business is booming in China, so there’s a lot of capital formation and reverse mergers over there … I think it’s a substance over form question. There’s not a whole lot of substance to these reports.”