The US Securities and Exchange Commission (SEC) has charged Deloitte’s Chinese member firm with ‘wilfully’ violating the Sarbanes-Oxley Act and the Securities Exchange Act of 1934 by failing to provide audit work papers. The SEC launched administrative action against the firm after several unsuccessful attempts to obtain documents related to the audit of Longtop Financial Services.
The case is to be heard in front of a US federal government administrative judge, an independent judicial officers who in most cases conduct hearings and rule on allegations of securities law violations initiated by the SEC.
Deloitte China is prevented by Chinese law from handing over the paperwork of a Chinese company to a foreign regulator.
If the SEC’s case is successful in front of an administrative judge, Deloitte China might face a fine or be bared from practicing under SEC’s jurisdiction.
The SEC said it has been making extensive efforts for more than two years to obtain documents related to the firm’s work for the company, which issues US securities registered with the SEC. “Foreign firms auditing US issuers should not be permitted to shield themselves from regulatory scrutiny to the detriment of US investors,” SEC’s division of enforcement director Robert Khuzami said.