Big Four Audit Firms in China in Settlement Talks With SEC Enforcers; Dispute Arose Over Access to Audit Documents About Chinese Clients
June 6, 2014 Leave a comment
Big Four Audit Firms in China in Settlement Talks With SEC Enforcers
Dispute Arose Over Access to Audit Documents About Chinese Clients
MICHAEL RAPOPORT
June 2, 2014 7:35 p.m. ET
U.S. securities regulators and the Chinese affiliates of the Big Four accounting firms have been discussing a potential settlement of their dispute over access to the firms’ audit documents about their Chinese clients, according to a filing late Monday.
The firms—the Chinese arms of PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG—have been in “continued settlement efforts” with the Securities and Exchange Commission’s enforcement division, according to the filing, issued by the five-member SEC.
“We’ve definitely been trying” to reach a settlement, said Amy Call Well, an Ernst & Young spokeswoman. A PwC spokeswoman confirmed the information in the filing but said she couldn’t comment further. The other two firms and the SEC couldn’t immediately be reached for comment.
The settlement talks, which haven’t been previously reported, come as the firms’ Chinese affiliates appeal a judge’s ruling that ordered them suspended from auditing U.S.-traded companies for six months. An SEC administrative law judge issued the suspension in January after the firms refused to give the SEC some documents it had sought from them about Chinese audit clients who are under SEC investigation.
The firms refused to hand over the documents because of fear they would be penalized under strict Chinese laws that treat such documents as akin to “state secrets,” though the U.S. and Chinese governments have worked out a separate arrangement that funneled to the SEC at least some of the documents it sought.
The six-month suspension is on hold while the firms appeal the ruling to the full commission. If it ultimately is imposed, the suspension of the major Chinese firms could leave numerous Chinese companies without an auditor. It could also complicate the audits of some U.S. multinationals that use the Chinese firms to audit their Chinese operations.
Monday’s filing was issued in connection with the appeal, granting the firms and the SEC enforcers a 90-day extension to file their legal briefs on the appeal. The filing deadlines now run until December. According to the filing, both the firms and the enforcement division believe the extension of time “would facilitate the parties’ continued settlement efforts.”
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