US charges 'Big Four' accounting firms in China for refusal to produce companies' audit data

London, Tue, 04 Dec 2012 ANI

London, Dec. 3 (ANI): The US financial regulator has charged the Chinese units of five accounting firms, including the 'Big Four', over refusal to hand over auditing data on China-based companies.

The companies are under investigation by the Securities and Exchange Commission for 'potential accounting fraud against US investors'.

The nine China-based firms are publicly traded in the US.

The five firms are the Chinese affiliates of the Big Four, Deloitte Touche, Ernst and Young, KPMG and PricewaterhouseCoopers, as well as the accounting firm BDO's China unit.

The SEC said the audit firms had refused to co-operate in the investigations, the BBC reports.

The firms are charged with 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 trading on US markets, the report said.

"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," Robert Khuzami, director of the SEC's enforcement division, said.

"Firms that conduct audits knowing they cannot comply with laws requiring access to these work papers face serious sanctions," he said.

According to the report, claims of fraud and questionable auditing standards at several US-listed Chinese companies, for example Sino-Forest Corporation, have dented investor confidence.

The scandals have prompted US regulators to react by demanding access to auditing documents kept in China by accounting firms, the report said.

China's state law says that Chinese company records can be claimed as state secrets and the firms have cited this for refusal to release their records, the report added. (ANI)



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