• Register
Return to: Home > News > SEC accepts $2m settlement offer of Chinese Big Four firms

SEC accepts $2m settlement offer of Chinese Big Four firms

The US Security and Exchange Commission (SEC) has accepted the settlement agreement offered by the Chinese firms of the Big Four to halt the current proceedings for their refusal to hand over the audit work of Chinese clients listed on US stock exchanges.

Deloitte, EY Hua Ming, KPMG Huazhen and PwC Zhong Tian faced a six-month suspension from practicing before the SEC since January 2014, which was subsequently appealed on the grounds of a possible conflict between US and Chinese securities laws.

The SEC granted also several extensions to allow for the discussion of an out-of-court settlement throughout 2014. Especially, after the SEC received some of the requested audit work through the China Securities Regulatory Commission (CSRC), its counterpart.

The current settlement halts the proceedings against the Big Four but not against BDO China Dahua, which wasn't part of the settlement offer.

The Big Four will pay $500,000 each acknowledging that they did not produce the documents upon the SEC's request, thus violating the Sarbanes-Oxley Act, but "without admitting or denying" other findings.

In addition the settlement imposed on the Big Four the obligation to comply with similar requests for documents that the SEC could issue in the next four years.

Otherwise the SEC can resume the current proceedings, start a fresh one or impose an automatic six-month bar on the firm.

The SEC enforcement division director Andrew Ceresney said the settlement showed the recent progress in obtaining documents from registered firms in China.

"The settlement also holds four of the firms accountable for previously violating US rules, and makes clear that should production of documents cease, the SEC can restart the administrative proceeding," Ceresney said.

Prior to the announcement by the SEC, Pekin University accountancy professor Paul Gillis wrote in his blog that a deal between Chinese regulators and the SEC and PCAOB should be in place before such a settlement with the accountancy firms could be reached.

"US regulators would be foolish to let the Big Four off the hook before they get such a deal," Gillis wrote.

Gillis argued that the crux of the question regarding the cross-border cooperation is that China had refused to allow the firms to turn over the audit work to the SEC or PCAOB, and therefore any deal needed to be struck with Chinese regulators and not with the accounting firms.

Regarding the penalty of $500,000 to each of the Big Four, he wrote:

"If you accept the firm's arguments that they were caught between a rock and a hard place when deciding whether to break either Chinese or US law, then no penalty would be appropriate."

He continued: "If you buy the judge's argument that if the firms had found themselves in such a place because it was their own decisions (to accept clients when they knew that they might be breaking US law) that put them there, then the penalties need to be much larger."

Update: SEC's settlement with the Chinese Big Four does little for investors, Professor Gillis

 

Top Content

    Accountancy Europe: the winner takes it all

    Jonathan Minter spoke to Olivier Boutellis-Taft, chief executive officer at Accountancy Europe, about how technology could change the industry, and how training needs to keep up to enable the profession to develop

    read more

    Embracing global technology trends

    Accountancy Europe’s Digital Day 2018 found the European accounting profession looking to tackle the challenges presented by new technologies head on. Jonathan Minter reports from the day

    read more

    IMA Conference: automation of the audit

    At the annual conference of the Institute of Management Accountants (IMA) in Indianapolis, Deloitte partner Alex Smith gave a presentation on digital transformation in the profession. Joe Pickard spoke to Smith following the presentation to find out more about his views on the future of audit

    read more

    IMA Conference: technology and the human effect

    The annual conference of the Institute of Management Accountants (IMA) took place in Indianapolis this year. Members of the profession gathered to hear the latest from the institute and other market players, covering some of the challenges and opportunities the profession faces.

    read more

    The Caribbean: a digital paradise

    The ICAC hosted its 36th annual conference in June this year – very much looking to the future following a tough 2017 for the Caribbean. Jonathan Minter spoke with chief executive officer Misha Lobban Clarke

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.