SEC judge bars "Big Four" China units for six months over audits

Thu Jan 23, 2014 4:41am EST
 
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By Sarah N. Lynch

WASHINGTON (Reuters) - Chinese units of the global "Big Four" accounting firms should be suspended from auditing U.S.-listed companies for six months, a judge in the United States ruled, in an escalation in a long-running dispute over regulators' access to documents.

In a harshly worded 112-page ruling, Securities and Exchange Commission Administrative Law Judge Cameron Elliot censured the Chinese affiliates of KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young.

The four firms said that they intended to appeal against the ruling. "In the meantime the firms can and will continue to serve all their clients without interruption," the four said in a joint statement.

Elliot, an SEC judge who operates independently, sided with the SEC and said the companies "willfully" failed to give U.S. regulators the audit work papers of certain Chinese companies under investigation for accounting fraud.

Auditors have refused to turn over such papers for fear of violating Chinese secrecy laws. They argue that it is up to Washington and Beijing to resolve the dispute.

They're putting pressure on us because they think we can influence the regulators in China, which is absolutely not correct," said Paul Winkelmann, the partner in charge of risk and compliance for PwC in Greater China.

"They keep putting pressure on us when in fact the whole thing can only be resolved by government-to-government or regulator-to-regulator discussions - and those discussions are taking place so we're just piggy in the middle."

Elliot also censured a fifth firm, Dahua, previously a member of the BDO international network, but did not impose a six-month suspension.   Continued...

 
The logo of the Ernst & Young accounting and consulting firm is seen on a building in Warsaw August 30, 2013. REUTERS/Kacper Pempel