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SEC Charges Major Accounting Firms' Chinese Affiliates With Blocking
Fraud Investigation
SEC Charges Major Accounting Firms' Chinese Affiliates With Blocking Fraud
Investigation
Last Update: 12/3/2012 12:24:31 PM
By Saabira Chaudhuri
The U.S. Securities and Exchange Commission has charged the Chinese affiliates of
several major accounting firms with violating U.S. securities laws by refusing to
produce audit work papers and other documents related to China-based companies
under investigation for potential accounting fraud against U.S. investors.
The five firms charged are Deloitte Touche Tohmatsu Certified Public Accountants
Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen, PricewaterhouseCoopers Zhong Tian
CPAs Ltd. and BDO China Dahua Co.
According to the SEC, its investigators have been making efforts for the past
several months to obtain documents from these firms, which have "refused to
cooperate." The audit materials are being sought as part of SEC investigations
into potential wrongdoing by nine China-based companies whose securities are
publicly traded in the U.S.
"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," said Robert Khuzami, director of the SEC's division of
enforcement. "Firms that conduct audits knowing they cannot comply with laws
requiring access to these work papers face serious sanctions."
The SEC has been cracking down on accounting fraud, and to date has deregistered
the securities of nearly 50 companies and filed fraud cases against more than 40
foreign issuers and executives.
Earlier this year, the SEC announced an enforcement action against Shanghai-based
Deloitte Touche Tomatsu for refusing to produce documents for an SEC
investigation into one of its China-based clients. That proceeding is ongoing.
investigation into one of its China-based clients. That proceeding is ongoing.
Write to Saabira Chaudhuri at [e-mail]
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(END) Dow Jones Newswires
December 03, 2012 12:24 ET (17:24