Ernst & Young in tentative deal in Canada on Sino-Forest audit

Fri Sep 19, 2014 5:47pm EDT
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TORONTO, Sept 19 (Reuters) - Major accounting firm Ernst & Young LLP has reached a tentative settlement with Canada's biggest securities regulator over its audits of Sino-Forest Corp and another China-focused company, the Ontario Securities Commission said on Friday.

The OSC will hold a hearing on Sept. 30 to decide whether to approve the settlement related to audits of the insolvent forestry company and clothing and footwear company Zungui Haixi Corp, it said in a brief statement.

The terms of the settlement were not disclosed. Ernst & Young could not immediately be reached for comment.

The OSC plans to call Ernst & Young auditors as witnesses in a separate hearing against former Sino-Forest executives who the regulator alleges willfully defrauded investors. The executives have denied the charges.

Sino-Forest had been listed on the Toronto Stock Exchange and was at one point valued at more than C$6 billion ($5.47 billion). But its shares tanked and were later de-listed after a short-seller in 2011 alleged the company had exaggerated its assets.

In July, the OSC settled with David Horsley, Sino-Forest's former chief financial officer. He was fined and banned from being a public company officer or corporate director.

Zungui Haixi Corp was probed and in 2011 after Ernst & Young flagged accounting concerns within the company.

(1 US dollar = 1.0961 Canadian dollar) (Reporting by Alastair Sharp; Editing by Jeffrey Hodgson and Leslie Adler)