U.S. Treasury Secretary Jack Lew says regulators in China are prepared to begin handing over audit work papers to U.S. officials to break the standoff over regulation of China-based companies listed on U.S. exchanges.

Lew's remark came at the end of two days of strategic and economic talks between U.S. and Chinese officials to reach an investment treaty that would lead to business opportunities for both countries. “China's securities regulator announced that it will begin providing certain requested audit work papers to our market regulators, an important step towards resolving a long-standing impasse on enforcement cooperation related to companies that are listed in the United States,” said Lew.

A China Securities Regulatory Commission spokesman told media in China that audit work papers for one company would be released soon, although the CSRC didn't identify the company. Dozens of China-based companies have been delisted from U.S. exchanges in the past few years after a string of accounting frauds that are under investigation by the SEC. The Securities and Exchange Commission has launched its most aggressive pursuit against Longtop Financial Technologies, hauling its audit firm, Deloitte Touche Tohmatsu, into the fray with U.S. legal action to compel the parent audit firm to get involved. The SEC also has taken action against all the other Big 4 networks and a BDO network firm in its quest to access audit work papers. Auditors have told the SEC they are prevented by law in China from cooperating with U.S. authorities.

Both Chinese and U.S. officials reportedly have agreed to restart stalled negotiations toward an investment treaty. China is searching for greater U.S. investment in dozens of industries as well as better access for China-based companies to U.S. markets. Lew said the agreement to resume treaty negotiations represents a significant breakthrough, hoping a treaty can level the playing field by opening markets for fair competition.

Both the SEC and the Public Company Accounting Oversight Board have been working for years to gain access to China-based companies and auditors to enforce U.S. capital market rules on those entities listed and operating in the United States. The SEC did not comment on the CSRC or Lew's remarks. PCAOB spokesman Colleen Brennan said that the board regards the news as a positive step forward in cross-border audit oversight cooperation and it looks forward to receiving documents that have been requested. “This should lay the foundation for further cooperation on cross-border inspection arrangements,” she says.

Beyond concerns over fraud allegations, the PCAOB also has been working for several years to gain access to audit firms located in China and registered in the United States to conduct routine inspections. The board recently announced it had established a “memorandum of understanding” on enforcement cooperation with the China Securities Regulatory Commission and the Ministry of Finance in China. The agreement establishes a cooperative framework for each country to produce and exchange audit documents relevant to investigations in the United States and China, although legal experts point out the agreement essentially formalizes the present relationship, which limits U.S. access to anything in China.