CHINESE branches of the world's five major accounting firms have been accused of breaking the law in the United States, renewing tensions in a regulatory standoff that may further chill the US-listing of Chinese firms.
The US Securities and Exchange Commission has begun proceedings against the Chinese affiliates of Deloitte, KPMG, PricewaterhouseCoopers, BDO and Ernst & Young over the companies' refusal to supply documents relating to audits of US-listed Chinese companies suspected of fraudulent behavior.
"The audit materials are being sought as part of SEC investigations into potential wrongdoing by nine China-based companies whose securities are publicly traded in the US," the commission said.
It is the largest action the SEC has taken so far in its efforts to force the handing over of the documents since China and the US securities regulator became entangled in negotiations over the inspection of US-listed Chinese firms.
Hundreds of Chinese companies trade on US stock exchanges. The SEC has been investigating many of them for possible accounting fraud. The agency says the accounting firms, which audit Chinese companies, have refused to cooperate in investigations of nine firms and to provide documents.
The Chinese affiliates of the firms, which are subject to Chinese law, say they cannot hand over the documents because the Chinese government won't allow them to do so. The Chinese government maintains that providing the documents to US regulators would violate Chinese sovereignty and its secrecy laws.
"The action by the US Securities and Exchange Commission is the result of conflicting laws between the US and China," PricewaterhouseCoopers' Zhong Tian said in a statement yesterday. "PwC China has cooperated with the SEC at every opportunity. However, PwC China will, and must, comply with its legal obligations under China law."
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