UPDATE 1-Ernst & Young in tentative deal in Canada on Sino-Forest audit

Fri Sep 19, 2014 8:29pm EDT
 
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(Adds comment from Ernst & Young)

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.

"We are pleased we were able to negotiate a no-contest settlement agreement with the OSC and we're looking forward to the approval hearing on Sept. 30. Until that time, we are not able to provide any further comment," an Ernst & Young spokeswoman said in an email.

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 delisted 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, Leslie Adler and Lisa Shumaker)