01 May SEC Battle with Big Four Continues Over China

The DealFlow Report tells us that the year and a half old case brought by the Securities and Exchange Commission against the Chinese affiliates of major accounting firms still continues. The latest activity: Deloitte lost a motion to delay the case against them until the case against all the firms is resolved.

China continues to take the position that the SEC and its accounting regulator arm the Public Company Accounting Oversight Board (PCAOB) cannot review the work papers of Chinese auditors as it is a violation of Chinese secrecy laws. The case has been pending since September 2011.

Over 300 Chinese companies went public in the US during the 2000s, many through reverse mergers. Over the last few years, dozens have been accused of fraud or other wrongdoing. Some cases have been settled, others are continuing.

There is a risk that the PCAOB will prohibit future audits of US public companies by these Chinese affiliates if they do not have the ability to review how they are doing their work. We continue to follow the case, we will let you know of any further developments.