U.S. regulators probing potential fraud by China-based companies increased pressure on their auditors by formally accusing affiliates of Big Four firms of withholding documents from investigators.
Deloitte Touche Tohmatsu CPA Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs Ltd. have refused to cooperate with accounting investigations into nine companies whose securities are publicly traded in the U.S., the Securities and Exchange Commission said in an administrative order yesterday. BDO China Dahua Co. was also named by the SEC in the action.
The auditors claim Chinese law prevents them from assenting to the SEC's demands, hindering U.S. efforts to probe allegations of fraud that have wiped 61 percent from a gauge of Chinese and Hong Kong stocks traded in North America since January 2011. Failure to reach an agreement on cross-border access to records may prompt U.S. regulators to seek to deregister the firms, said Paul Gillis, professor at Peking University's Guanghua School of Management.
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