SEC charges top accounting firms over China data



Published — Monday 3 December 2012

Last update 4 December 2012 2:02 am

| نسخة PDF Print News | A A

WASHINGTON: US market regulators charged the China affiliates of five top accounting firms yesterday with violation of securities laws for refusing to provide audit data related to China-based companies.
"The audit materials are being sought as part of SEC investigations into potential wrongdoing by nine China-based companies whose securities are publicly traded in the US," the Securities and Exchange Commission said.
The five firms charged were BDO China Dahua, Deloitte Touche Tohmatsu Certified Public Accountants, Ernst & Young Hua Ming, KPMG Huazhen, and PricewaterhouseCoopers Zhong Tian.
The charges are the latest action taken by US authorities in a brewing storm that pits US securities regulations against China's tough state secrets law.
Regulators are trying to pry open China's tight grip on company secrecy amid a wave of dubious China listings on US markets, where having an auditor is a requirement to be listed.
A number of Chinese companies have used reverse mergers, in which they acquire a US listed company, creating a public shell corporation listed on the New York Stock Exchange or the Nasdaq.
The SEC said the five firms had violated the Securities Exchange Act and the Sarbanes-Oxley Act, which requires foreign public accounting firms to provide the SEC upon request with audit work papers involving any company whose shares trade on US markets.
SEC investigators have been trying to obtain the data for months from the audit firms but they have refused to cooperate, it said in a statement.
"Only with access to work papers of foreign public accounting firms can the SEC test the quality of the underlying audits and protect investors from the dangers of accounting fraud," said Robert Khuzami, director of the SEC's Division of Enforcement.
"Firms that conduct audits knowing they cannot comply with laws requiring access to these work papers face serious sanctions."
The SEC said a judge would schedule a hearing and determine the sanctions against the firms.
Deloitte Touche Tohmatsu said it was caught between legal differences between the world's two largest economies, "a matter that needs to be resolved on a profession-wide basis."
"While it is unfortunate that the two countries have not yet been able to find common ground on these issues, we remain hopeful that a diplomatic agreement can be reached, and we stand ready to assist that effort in any way we can," the New York-based company said in a brief statement.
The SEC's said its enforcement arm has been cracking down on China-based audit firms as part of an initiative to "address concerns arising from reverse mergers and foreign issuers."
Earlier this year, the SEC announced an enforcement action against Shanghai-based Deloitte Touche Tohmatsu for refusing to produce documents for an SEC investigation into one of its China-based clients; that action is under way.
The SEC previously filed a subpoena enforcement action in federal court against the firm for failing to produce documents in response to a subpoena pertaining to its longtime client Longtop Financial Technologies Limited.

What's happening around Saudi Arabia

JEDDAH: A total of 172,000 pilgrims have arrived via 861 flights from around the world at King Abdulaziz International Airport so far, said Turki Al-Theeb, the airport’s director of media and public relations.He said the number of Haj flights are exp...
RIYADH: Saudis from all walks of life are hopeful that the visit of Custodian of the Two Holy Mosques King Salman to the United States this week will strengthen relations between the two countries and ensure a peaceful and stable Middle East.Shoura C...
JEDDAH: Security forces killed a terrorist who tried to attack a security facility in Abqaiq on Friday, the Interior Ministry said.Sgt. Ali Al-Habeeb, 47, was killed during the confrontation with the attacker, identified as Nawaf Manahi Shabib Al-Ota...
ANKARA: Labor Minister Mufrej Al-Haqabani has said that unemployment among Saudis is relatively high, pointing to the negative impact of retreating oil prices on the economy and labor market. He confirmed that the Kingdom was continuing with the impl...
JEDDAH: The country’s newly elected municipal councils should have a say in selecting mayors and secretaries general of cities, participants at a Municipal Councils Forum suggested on Thursday.They proposed that the councils should compile a list of...
DAMMAM: Many Saudis have complained that while the Kingdom has attractive local tourist spots, several charge high prices, offer poor services and lack proper hygiene.They said that Taif, Abha, Baha, Jeddah and the Eastern Province have popular resor...

Stay Connected

Facebook