The US Securities and Exchange Commission (SEC) said that the China Securities Regulatory Commission (CSRC) have indicated that they will handover audit work papers related to an investigation into Deloitte China. The audit documents are believed to be in relation to US-listed software company Longtop Financial Services.
The SEC statement was released as part of the a subpoena enforcement action against the Chinese unit of Deloitte lodged by the SEC in the US District court in Columbia in an attempt to get hold of the audit documents.
The SEC said: “The SEC has not received these documents or had a chance to review them, nor does the SEC know when the production will be made, the extent of redactions, if any, whether the production will be complete, or whether there will be potential use restrictions”.
“If and when the SEC receives the documents, and has had a chance to review and assess them, we will advise the Court of the impact, if any, on the subpoena enforcement action,” the SEC added.
In late May the Public Company Accounting Oversight Board (PCAOB) signed a Memorandum of Understanding (MoU) with the CSRC and the Chinese Ministry of Finance enabling the production and exchange of audit documents relevant to investigations in both jurisdictions.
The MoU and the indication that the SEC is to receive documents related to Longtop might signal the end of the conflict between the SEC and the Chinese operations of the Big Four and BDO, which were under fire for not disclosing audit documents related to several US-listed Chinese companies.
Deloitte resigned as Longtop’s auditor in May 2011 after discovering falsified financial records, including sales revenue, cash at bank and loan balances. Longtop’s shares were suspended in the same week.
PCAOB and Chinese regulator sign MoU
SEC allowed to pursue Deloitte China over Longtop documents
Deloitte quits as Longtop auditor