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SEC Charges China Affiliates of Big Four AccountingFirms with Violating U.S. Securities Laws in Refusing toProduce Documents
FOR IMMEDIATE RELEASE2012-249
Washington, D.C., Dec. 3, 2012
— The Securities and ExchangeCommission today began administrative proceedings against the Chinaaffiliates of each of the Big Four accounting firms and another large U.S.accounting firm for refusing to produce audit work papers and otherdocuments related to China-based companies under investigation by theSEC for potential accounting fraud against U.S. investors.The SEC charged the following firms with violating the Securities ExchangeAct and the Sarbanes-Oxley Act, which requires foreign public accountingfirms to provide the SEC upon request with audit work papers involving anycompany trading on U.S. markets:BDO China Dahua Co. LtdDeloitte Touche Tohmatsu Certified Public Accountants LtdErnst & Young Hua Ming LLPKPMG Huazhen (Special General Partnership)PricewaterhouseCoopers Zhong Tian CPAs Limited
Additional Materials
SEC OrderAccording to the SEC’s order instituting the proceedings, SEC investigatorshave been making efforts for the past several months to obtain documentsfrom these firms. The audit materials are being sought as part of SECinvestigations into potential wrongdoing by nine China-based companieswhose securities are publicly traded in the U.S. The audit firms haverefused to cooperate in the investigations. “Only with access to work papers of foreign public accounting firms can theSEC test the quality of the underlying audits and protect investors from thedangers of accounting fraud,” said Robert Khuzami, Director of the SEC’sDivision of Enforcement. “Firms that conduct audits knowing they cannotcomply with laws requiring access to these work papers face serioussanctions.” An administrative law judge will schedule a hearing and determine theappropriate remedial sanction against the firms. The order requires theadministrative law judge to issue an initial decision no later than 300 daysfrom the date of service of the order.The SEC has launched an initiative to address concerns arising from reverse
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