The global accounting firms have been swept up in the accounting
scandals that have plagued many Chinese firms listed on American
Most notably, in May of last year, the Securities and Exchange
Commission filed an administrative action against the Shanghai
office of Deloitte and Touche for refusing to provide audit work
papers related to one of its clients. The unidentified Chinese
client has been under investigation by the S.E.C. for accounting
fraud since 2010.
Deloitte Touche Tohmatsu CPA Ltd. had provided the documents to
the China Securities Regulatory Commission at the request of the
S.E.C., but argued that it could not provide them to United States
regulators under Chinese law.
The American regulatory mandate extends all the way to China due
to the fact that many Chinese firms choose to list on American
stock exchanges while using auditors based in China. Under the
Sarbanes-Oxley law, American regulators are obliged to conduct
periodic inspections of the auditors of all firms listed on U.S.
This appears to be the first
time that section 102-e of the SOX has been cited in an enforcement
action. That provision requires that auditors of foreign companies
whose securities are registered in the United States provide audit
work papers when asked to do so by the S.E.C.
This action against D&T
Shanghai came on the heels of an earlier one in which the S.E.C.
asked a federal judge to uphold a subpoena demanding that the same
office provide work papers related to its audit of Longtop
Financial. Longtop's stock price collapsed after D&T
Shanghai discovered fraud in the course of its audit. That case is
The consequences could be
severe if the Chinese government continues to challenge
international regulatory cooperation. Penalties under section 102-e
range from censoring the Chinese affiliate to barring it from
certifying the audits of companies whose securities are traded in
the United States.
American and Chinese officials have met to work toward a
diplomatic resolution to the conflict. In September of last year,
the S.E.C. requested a six month stay of the charges in order to
continue discussions with the Chinese government.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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