The U.S. Securities and Exchange Commission filed an enforcement action against Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to an investigation of its former auditing client Longtop Financial Technologies Limited.
D&T Shanghai hasn’t provided any documents to the SEC, which issued subpoenas to the firm on May 27, the agency said in a statement today, citing a filing in U.S. District Court in Washington. As a result, the SEC has been unable to access “critical” information in its probe of possible fraud at Longtop, the statement said.
Longtop, based in Hong Kong, said in May that D&T Shanghai quit because of errors in the company’s financial records. The SEC also began an investigation. In July, the SEC and Public Company Accounting Oversight Board met with counterparts in China to discuss cross-border oversight.
Today’s action “essentially is a battle between the SEC and Chinese regulators forcing D&T Shanghai to assert Chinese law as an explanation for why it cannot produce records,” Jacob Frenkel, a former SEC lawyer now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland, said in an interview. “Auditing firms know that the SEC has the right to subpoena and review and consider audit work papers. This is about bringing to a head the dispute over access to information relating to audits of Chinese companies.”
In order to compete fairly we must have transparency; otherwise we'll all be guilty of doping our domestic businesses to the detriment of the competion.
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