The Big Four in China have appealed the US Securities and Exchange Commission (SEC) six month ban which prohibits them to provide services to US listed Chinese companies.
All four joint ventures (Ernst & Young Hua Ming, KPMG Huazhen, Deloitte Touche Tohmatsu, and PwC Zhong Tian) as well as BDO’s former Chinese firm DaHua, had been found guilty of violating the Sarbanes-Oxley Act (SOX) by the SEC for refusing to produce audit work papers and other documents related to China-based companies under investigation for alleged accounting fraud against US investors.
All firms involved have now responded to the January ruling by filling an appeal in which they argue that the ruling had “misconstrued the operative legal standard which provides that only a ‘willful refusal to comply’ with an SEC request for audit work papers or other documentation constitute a violation of SOX”.
“It also ignored critical exculpatory evidence, and proposed sanctions that are inconsistent with the law,” the firms said in their filling.
The appeal will now be heard by five SEC administrative law judges who can uphold, overturn or modify the initial ruling.
The judges could take months and longer to reach a decision and parties may then appeal to the US Court of Appeals in Washington.
Both the Sarbanes-Oxley Act and SEC Act require foreign public accounting firms to provide the regulator with audit work papers involving any company trading on US markets upon request.
However at the time all firms involved in the case claimed that such demands are in violation of Chinese secrecy laws and were unable to turn over audit working papers requested by the SEC in several fraud investigations.