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.
Deadlocked
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.”
