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SEC, Big 4 Firms Make Progress in China Audit Dispute
From the Wall Street Journal of Mon, 15 Dec 2014 18:12:00 EST
The U.S. Securities and Exchange Commission says progress is being made in talks with Chinese affiliates of the Big 4 accounting firms to settle the dispute over audit documents.
The U.S. Securities and Exchange Commission says progress is being made in talks with Chinese affiliates of the Big 4 accounting firms to settle the dispute over audit documents. Getty Images

U.S. regulators and the Chinese affiliates of the Big Four accounting firms have made “substantial progress” toward settling their dispute over access to the firms’ audit documents, the two sides said Monday.

But Securities and Exchange Commission enforcement officials and the Chinese affiliates of the Big Four firms—PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG—say that while their progress toward a settlement has “increased significantly,” they still need “significant time and care” to discuss the potential pact, according to an order in the SEC’s administrative proceeding against the firms.

The discussions involve audit documents the SEC had sought from U.S.-traded Chinese clients of the Big Four accounting firms’ China-based affiliates. The order didn’t give any details about the prospective terms of a settlement, which the two sides have been discussing since June, or when it might be completed.

The SEC had demanded documents from the firms to assist its investigations of some of their U.S.-traded Chinese clients, but the firms refused to turn over the documents, citing strict Chinese laws that treat such documents as akin to “state secrets.”

In January, an SEC administrative law judge ruled the firms had violated U.S. law and ordered them suspended from auditing U.S.-traded companies for six months. The suspension is on hold while the firms appeal the judge’s ruling to the five-member SEC.

If imposed, a suspension could leave dozens of Chinese companies without auditors and complicate the audits of some U.S.-based multinational companies with major operations in China.

To allow the settlement talks to continue, the SEC granted a request by the Big Four firms and the SEC enforcers for another 70 days before legal briefs on the appeal will be due. The two sides’ briefs, which were due later this week, will now be due Feb. 26. The extension of time is the third since the settlement talks began, and both sides in the order said it is expected to be the last.

Write to Michael Rapoport at Michael.Rapoport@wsj.com



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