China Energy Recovery, Inc. (CGYV)

[Ecomike]

http://www.sec.gov/news/press/2012/2012-249.htm?utm_source=Sinocism+Newsletter&utm_campaign=0a65f487e8-The_Sinocism_China_Newsletter_For_12_04_2012&utm_medium=email

http://chovanec.wordpress.com/2012/06/17/can-u-s-and-china-avert-accounting-armageddon/

http://www.chinaaccountingblog.com/weblog/beginning-of-the-end.html?utm_source=Sinocism+Newsletter&utm_campaign=0a65f487e8-The_Sinocism_China_Newsletter_For_12_04_2012&utm_medium=email

Chinese regulators had meetings in Washington last week with the PCAOB and SEC. They must not have gone very well.

The SEC yesterday charged the Big Four and BDO in China with violations of U.S. securities laws and the Sarbanes-Oxley Act for failing to provide audit working papers for U.S. listed companies. This follows the earlier charges against Deloitte for the same issue, and the Court action against Deloitte for failure to produce the working papers for Longtop Financial Technologies.

The Big Four issued statements pointing blame at diplomatic failure.

I believe that this marks the beginning of the process to deregister Chinese accounting firms from the PCAOB and to ban them from practice before the SEC. Unless resolved, this will likely lead to the delisting of U.S. listed Chinese companies. Multinational companies in China may also face issues since PCAOB rules require an auditor playing a substantial role in the audit of an MNC be registered with the PCAOB. There are situations where the China Big Four are playing a substantial role in the audit of U.S. MNCs that have substantial operations in China.