Smart. Sharp. Funny. Fearless.
Tuesday, January 15, 2019

Washington (AFP) – A U.S. judge has ordered Chinese units of the “Big Four” global accounting firms to be suspended from auditing U.S.-traded companies for six months, saying they “willfully violated” U.S. laws.

The 112-page ruling by U.S. Securities and Exchange Commission (SEC) administrative law judge Cameron Elliot could temporarily leave more than 100 Chinese companies quoted on U.S. markets without an auditor and unable to trade.

The auditors and a fifth China-based accounting firm fell foul of the law by refusing to turn over documents about some of their clients to the commission, which wanted help in a fraud probe, Elliot ruled.

The ruling does not take effect immediately and the companies plan to launch an appeal with the SEC.

“The firms note that the decision is neither final nor legally effective unless and until reviewed and approved by the full U.S. SEC Commission. The firms intend to appeal and thereby initiate that review without delay,” they said in a joint statement.

China’s stock market regulator, the China Securities Regulatory Commission, expressed “profound regret” over the SEC decision Friday.

“This ruling does not take into account Chinese efforts to hand over audit documents,” spokesman Deng Ge told reporters.

If the ruling stands, not only will the Chinese companies be left with no auditor but it could also hamper the audits of U.S. multinationals with significant operations in China.

This is because the Chinese affiliates of the Big Four — Pricewaterhouse Coopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young — often help their U.S. sister firms complete those audits.

Without audited financial statements, a company cannot sell securities in the United States or remain listed on the country’s exchanges.

“This is a body blow to the Big Four,” said Paul Gillis, a Beijing-based professor at Peking University’s Guanghua School of Management. “It’s really quite a harsh ruling,” he told Dow Jones Newswires.

The SEC hailed the ruling, saying it upheld the commission’s authority to obtain records that are “critical to our ability to investigate potential securities law violations and protect investors”.

The fifth firm, Dahua CPA, was censured by Elliot but not suspended. Dahua was an affiliate of another large accounting firm, BDO, until last year although they are no longer linked.

The SEC had sought audit work papers from the firms to assist its investigations of more than 130 Chinese companies trading on U.S. markets that have been subject to accounting and disclosure questions in the past few years.

Many of those companies have their independent audits performed by the Chinese affiliates of the Big Four.

The SEC had wanted to know more about what the auditors had found about the companies.

But the Chinese firms refused to turn over the documents, saying Chinese law treats the information in such documents as “state secrets”.

AFP Photo/Paul J. Richards

  • Share this on Google+0
  • Share this on Linkedin0
  • Share this on Reddit0
  • Print this page
  • 0

One response to “U.S. Judge Suspends Chinese Units Of ‘Big Four’ Auditors”

  1. daniel bostdorf says:

    Great—-but where are the jail terms for the Wall Street robber barons that tanked this country? I guess that question is for another article…

    I especially like this from the article:
    “If the ruling stands, not only will the Chinese companies be left with no auditor but it could also hamper the audits of U.S. multinationals with significant operations in China…..This is because the Chinese affiliates of the Big Four — Pricewaterhouse Coopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young — often help their U.S. sister firms complete those audits.”

    To this articles point… From the SEC:
    “The judge’s decision marks a major victory for the S.E.C., which for years tried with limited success to gain access to audit work conducted by Chinese accounting firms for Chinese companies that list in the United States. The accounting firms say Chinese secrecy laws forbid them from sharing the information…The S.E.C. said it was gratified by the decision, which upholds its authority. “These records are critical to our ability to investigate potential securities law violations and protect investors,” said Matthew Solomon, the chief litigation counsel in the SEC’s Enforcement Division.

    I think most common sense Americans realize after all the excesses of Wall Street for 30 years, it is simply a rigged game especially if there is no transparency. Until now—the SEC was in the pocket of most investment banks, investment firms…etc… we will see if the SEC can move foreword against the Timothy Geinthner protected Wall Street crooks….

    The real reason why information is withheld by banks is that they can charge those with the $$ to buy access to it….that is also the danger of NSA gobbling up data and subcontracting to computers owned by a third party…charge those with the $$ to buy access to it

    Preaching free market capitalism by these multinational investment companies is a joke. It is a phrase utilized only to keep its “authoritative power.” It is almost like a cult based upon an ideology of idolatry of money and greed.

    The real concept of capitalism is nonexistent. Public perception of capitalism is actually propaganda. Public really does not know what capitalism is anyway…

    Capitalism: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. (not an artificially controlled one like the Chinese)

    Vulture Capitalist’: An unethical venture capitalist who, by any means necessary, deprives an inventor of control over his or her own innovations and most of the money the inventor should have made from the invention…..capitalist who invests in floundering firms in the hopes that the firms will turn around by any means necessary.



    Oligarchy: a country, business, etc., that is controlled by a small group of people: the people that control a country, business, etc.: government or control by a small group of people …..sound familiar?

    Or

    Plutocracy: government by the richest people : a country that is ruled by the richest people: a group of very rich people who have a lot of power

    We live in a plutocracy, not a democracy, and the people are controlled by propaganda by the plutocracy that makes the ruling class appear to be “free market” capitalists when they are not.

    I applaud the SEC ruling….but these are hundreds of other firms that need to be suspended as well…

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.