Thursday June 21, 2012
SEC seeks Big 4 audit papers from China
NEW YORK: The Chinese arms of all the Big Four audit firms have been asked by US regulators to turn over documents related to audits of China-based companies listed in the United States, a source said.
The formal requests made by the US Securities and Exchange Commission (SEC) ratchet up the tension in a standoff between US authorities, the companies and Chinese officials over access to the auditors' work papers. Concerns are now growing that if no diplomatic solution is found, Chinese companies could be forced to delist from American stock exchanges.
The SEC has already filed an enforcement action against Deloitte's Shanghai arm seeking documents, but has not yet taken public enforcement action against the Chinese units of the other Big Four firms Ernst & Young, PwC and KPMG over Chinese audit papers.
Now that the other firms had received formal requests for documents, it could be a matter of time before they were in the same position as Deloitte, one legal expert said.
“If they don't produce the documents upon request, then it's possible that the SEC could take adverse action the way they already have done in the case of Deloitte Shanghai,” said William Currier, a partner with law firm White & Case.
On May 9, the SEC charged Deloitte's Shanghai arm with violating US securities laws by refusing to produce documents from an audit of an unnamed China-based company. The SEC said sanctions could include censure or revoking the firm's ability to practice before the commission.
PwC confirmed on Tuesday that it has received requests for documents. It did not say when the SEC asked for documents but said “at various times” it had received formal and informal SEC requests for audit papers from China.
“Like other firms that have received similar requests, in dealing with them we are confronted by conflicting laws between the United States and China,” PwC said in a statement. - Reuters