Chinese audit units to appeal after suspension ruling in US
Print Edition
Chinese units of the Big Four auditing firms are to appeal a US ruling suspending them from practicing in the US for six months, according to a joint statement yesterday.
The Chinese units of KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young were censured for “willfully” failing to provide the US securities regulator with the audit working papers of Chinese companies under investigation for accounting fraud.
The ruling, by Securities and Exchange Commission administrative law judge Cameron Elliot, will not take effect until reviewed and approved by the full SEC committee.
In their statement, the auditing firms said: “It is regrettable that the SEC’s administrative law judge has recommended sanctions against the Big Four firms in China for failing to produce work papers to the SEC in circumstances where such production would have violated Chinese law and regulations. The firms intend to appeal and thereby initiate that review without delay.”
The firms “can and will” continue to serve all their clients without interruption in the meantime, it said.
If the decision is upheld, more than 200 Chinese companies listed in the US will have to find new auditors.
“The incident will prompt Chinese firms to comply with international financial reporting standards with greater transparency and eased access to auditing documents for regulators,” Xinhua news agency quoted Kevin Wang, partner at All Bright Law Offices, a leading Chinese law firm in financial litigation, as saying.
Wang said the most likely outcome of the ongoing standoff would be a compromise.
The ruling is the latest escalation in a six-year standoff between China and US securities regulators over accessibility to audit documents.
Eight companies, mainly Internet companies, listed in the US in the second half of last year, ending a two-year gap due to concerns over credibility.
At least 39 US-listed Chinese firms have been accused of fraud and 44 were delisted from the US stock market for other violations, including cheating.
China’s Securities Regulatory Commission handed over documents related to some companies to the US regulator after the two parties reached an agreement last May, China Business News reported earlier this month.
The firms said they had worked hard to support “significant progress” in information sharing between Chinese and US regulators over the past year, and they believed that a diplomatic solution would be in the “best interests of all parties.”
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