Deloitte China claims Chinese authorities are preventing it from complying with a US Securities and Exchange Commission (SEC) investigation into former client Longtop Financial Technologies as the US regulator turns up the heat on the audit firm.
The SEC has asked a US federal court to force the Chinese affiliate of Deloitte, D&T Shanghai, to disclose documents relating to Longtop after the firm failed to respond to a US District Court of Columbia subpoena that set an 8 July deadline.
“We have passed on the SEC’s requests to the regulators in China, as we are required to, but so far the China regulators have not given us permission to provide papers to the SEC,” Deloitte said in a statement obtained by the International Accounting Bulletin.
Authorities of the two countries have been at loggerheads over cross-border inspections because US regulators are not allowed to inspect China-based firms.
In a fresh court application to try and force Deloitte’s compliance, the SEC said: “Although D&T Shanghai is in possession of vast amounts of documents responsive to the subpoena, it has not produced any documents to the SEC to date… as a result, the commission is unable to gain access to information that is critical to an investigation that has been authorised for the protection of public investors.”
The SEC, in co-operation with the Public Company Accounting Oversight Board, has been is in talks with Chinese authorities to pave the way for cross-border inspections and information sharing, however an agreement appears some way off. Deloitte believes it cannot act on the Longtop investigation until some form of agreement is struck.
“Deloitte China is happy to comply with any outcome that is agreed between them… We hope that a mechanism will be found shortly so that the matter can be resolved in compliance with the laws in both jurisdictions.”