Business / Markets

SEC charges accounting firms over China audit data

(Xinhua) Updated: 2012-12-04 10:23

WASHINGTON - The US Securities and Exchange Commission charged on Monday the China affiliates of some multinational accounting firms for refusing to produce audit work papers related to China-based companies under SEC investigations.

The financial regulator had been seeking the audit materials when investigating potential wrongdoing by nine China-based companies whose securities are publicly traded in the US, but the audit firms including BDO China Dahua Co Ltd, Deloitte Touche Tohmatsu Certified Public Accountants Ltd, Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs Limited had refused to cooperate, according to the SEC order.

China-based companies listed on US exchanges have faced increased scrutiny over the past two years after regulators became concerned that some firms may not be providing accurate financial statements to investors.

"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.

An administrative law judge will schedule a hearing and determine the appropriate remedial sanction against the firms. The order requires the administrative law judge to issue an initial decision no later than 300 days from the date of service of the order.

"For its part, PwC China has cooperated with the SEC at every opportunity. However, PwC China will, and must, comply with its legal obligations under China law," said Caroline Nolan, a PwC spokeswoman, in an e-mail statement.

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