Four firms, China in talks over corporate audit impasse: KPMG
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[January 25, 2014]
By Amanda Cooper
DAVOS, Switzerland (Reuters) — In the
midst of a U.S.-China quarrel over corporate auditing, the global
chairman of audit giant KPMG said on Friday that a "constructive
dialogue" was under way to defuse the dispute, which led days ago to
U.S. sanctions against the Chinese arms of the world's largest
"We are in dialogue with the Ministry of Finance in China on the
matter," KPMG <KPMG.UL> Chairman Michael Andrew told the Reuters
Global Markets Forum, an online community, in Davos, Switzerland,
during the World Economic Forum meetings.
Months of tension over U.S. regulators' attempts to examine audits
in China of U.S.-listed Chinese companies boiled over on Wednesday
when a U.S. administrative law judge sanctioned the Chinese units of
the so-called Big Four.
The Chinese arms of the Big Four — KPMG, Ernst & Young <ERNY.UL>,
Deloitte & Touche <DLTE.UL> and PricewaterhouseCoopers <PWC.UL> — have refused to hand over to U.S. officials the records of audit
work done by the Chinese units for U.S.-listed Chinese companies.
Fearing that complying with Washington's demands would violate
Chinese secrecy laws and incur Beijing's wrath, the firms are in the
middle of an international standoff that could escalate and damage
U.S.-China economic relations.
The sanctions, imposed by U.S. Securities and Exchange Commission
Administrative Law Judge Cameron Elliot, were expected and
underscored "the need for both governments to resolve the impasse,"
"The four accounting firms are caught in an unenviable position that
if we hand our work papers over, we breach Chinese law and risk jail
terms," Andrew said. "If we don't hand our papers over we get
sanctioned by the U.S. government."
Judge Elliot declared that the Chinese arms of Deloitte & Touche,
PricewaterhouseCoopers, KPMG and Ernst & Young should be suspended
from auditing U.S.-listed companies for six months.
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The firms "willfully" refused to turn over audit documents from
China requested by the SEC and deserve little sympathy, Elliot said.
The SEC for years has been trying to get documents from the firms to
investigate a rash of accounting scandals at Chinese companies whose
stocks are listed in the United States.
KPMG's Andrew said the judge's ruling will be appealed by the firms.
The matter could play out for months, or even years, as it goes
before the five-member SEC and moves into the courts.
China's securities regulator said on Friday it deeply regretted
Elliot's ruling. At a regular news briefing, ministry spokesman Deng
Ge said China hoped the SEC "would make the correct decision" on the
case, adding that "the SEC would bear all the responsibility for
consequences of its action."
(Additional reporting by Zhang Xiaochong
and Jonathan Standing in Beijing; writing by Dena Aubin in New York;
editing by Kevin Drawbaugh and Steve Orlofsky)
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