Skip to content

ChannelsContributorsSubscribe
LexBlog, Inc. logo
LexBlog, Inc. logo
AboutProductsJoin
Search
Close

China Auditor Update: SEC To Hear Appeal of Decision Barring Chinese Auditors

By Jennifer Achilles & John Tan
May 16, 2014
EmailTweetLikeLinkedIn

The Securities and Exchange Commission recently indicated that it would review, de novo, the January 2014 decision barring the Chinese affiliates of the “Big Four” accounting firms from appearing before the SEC.  The Commission’s Order, found here, also granted both parties’ motions to submit additional evidence for consideration – most significantly, the auditors’ evidence that they have given the Chinese regulators the audit work papers of the Chinese companies being investigated by the SEC.

As we wrote earlier here and here, the SEC instituted administrative proceedings in December 2012 against the Chinese affiliates of the accounting firms for willfully refusing to provide audit work papers to U.S. regulators as required under Sarbanes-Oxley.  The accounting firms had argued that complying with this requirement would violate China’s state secrets and archives laws, and subject the firms to civil and criminal penalties.  In January 2014, an Administrative Law Judge at the SEC found the accounting firms’ “good faith” arguments irrelevant to the issue of whether the firms willfully refused to comply with the SEC’s requests, and barred the firms from appearing before the SEC for six months.  Following the ALJ’s decision, both the audit firms and the SEC’s Division of Enforcement petitioned the Commission to review the ALJ decision and allow additional evidence to be submitted.

The Commission’s Order reveals that the audit firms have turned over the audit work papers they had been refusing to produce for years.  Although the firms did not produce the requested documents directly to the U.S. regulators, they gave them to the Chinese regulators who can, if they so choose, turn them over to their U.S. counterparts pursuant to the MOU the countries entered into last summer.

The audit firms are no doubt hoping that their “better late than never” productions will be seen as evidence that they were acting in good faith when they refused to comply with the SEC’s requests for the documents.  But it will be up to the Commission to decide whether the firms’ motives ultimately matter. 

Photo of Jennifer Achilles Jennifer Achilles
Read more about Jennifer Achilles
  • Posted in:
    Corporate & Commercial, International, Privacy & Data Security
  • Blog:
    Global Regulatory Enforcement Law Blog
  • Organization:
    Reed Smith LLP
  • Article: View Original Source

Stay Connected

Facebook LinkedIn Twitter RSS
Publishing Solutions
Real Lawyers

Company

  • About LexBlog
  • Careers
  • Press
  • Contact LexBlog
  • Privacy Policy
  • Editorial Policy
  • Disclaimer
  • Terms of Service
  • RSS Terms of Service

Support

  • 1-800-913-0988
  • Submit a Request
  • Support Center
  • System Status

New to the Network

  • LawBiz Blog
  • Conroy Creative Counsel
  • IP Litigation Blog
  • The Privacy Hacker
  • From Briefs to Books
Copyright © 2019, LexBlog, Inc. All Rights Reserved.
Powered By LexBlog