On Dec. 3 the Securities and Exchange Commission formally accused the Chinese affiliates of the Big Four accounting firms of violating the U.S. law. The issue was the failure of these China based audit firms’ to provide audit work papers in ongoing accounting fraud investigations of nine U.S.-listed, China-based companies.
The SEC had been in talks with the Chinese government to allow such exchange but seems like the talks have stalled. The Chinese government doesn’t allow such transfer as it fears that there might be state secrets were revealed accidently in such flow of information.
The SEC had charged Ernst & Young Hua Ming, Deloitte Touche Tohmatsu Certified Public Accountants, KPMG Huazhen, and PricewaterhouseCoopers Zhong Tian CPAs have been charged with violating the Securities Exchange Act and the Sarbanes-Oxley Act. If found guilty these auditor’s may face temporary or permanent deregistration in the U.S!
The auditing fraternity believes it is something that the governments of the two countries should address and come to a common ground on. The firms are stuck in the middle as they cannot go against the rules imposed by their home country (China) and if they don’t go against the rules they are in contempt of the rules of the SEC!