Deloitte has defended the actions of its
Chinese member firm, claiming Deloitte Shanghai has done everything
it can to assist authorities but is caught in the middle of a
jurisdictional tug-of-war between the US and China.
The defence is in response to Deloitte
Shanghai being formally charged by the US Securities and Exchange
Commission (SEC) of ‘wilfully’ violating the Sarbanes-Oxley Act by
failing to provide audit work papers.
Deloitte told International Accounting
Bulletin its Chinese member firm provided documents requested
by the SEC to the China Securities Regulatory Commission (CSRC) in
the hope the Chinese regulator would pass it onto the SEC.
“Unfortunately, that has not happened. In
2011, the SEC requested the documents directly from Deloitte
Shanghai, but because of China’s legal impediments, Deloitte
Shanghai was prohibited from producing the documents directly to
the SEC, resulting in the current 102(e) complaint against Deloitte
Shanghai,” the Big Four firm said.
Deloitte warned this was not an isolated case
and the dispute could have repercussions across the whole
profession.
“China’s legal impediments apply to all
accounting firms in China. If a diplomatic resolution is not
reached, it is likely that all of the major accounting firms in
China will find themselves having to choose between violating their
own national laws or facing a similar 102(e) proceeding by the
SEC,” the Big Four firm said.
Deloitte is due to appear in front of a US
federal government administrative judge, which is an independent
judicial officer who in most cases conducts hearings and rules on
allegations of securities law violations initiated by the SEC.
If the SEC’s case against Deloitte China is
successful, the firm could face a fine or be barred from practicing
under SEC’s jurisdiction.
