Reuters: Regulatory News: UPDATE 1-SEC charges Deloitte unit over audit work papers

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UPDATE 1-SEC charges Deloitte unit over audit work papers May 9th 2012, 16:47 Wed May 9, 2012 12:47pm EDT * This marks second SEC case against Deloitte China unit * SEC claims Deloitte violated Sarbanes-Oxley Act * SEC seeking audit papers of company under investigation * SEC fighting Deloitte for documents concerning Longtop By Sarah N. Lynch and Aruna Viswanatha WASHINGTON, May 9 (Reuters) - U.S. securities regulators on Wednesday charged Shanghai-based Deloitte Touche Tohmatsu CPA Ltd for refusing to provide audit work papers related to a Chinese company that is under investigation for accounting fraud. The administrative proceedings against the Deloitte affiliate by the Securities and Exchange Commission marks the latest effort by the agency to crack down on accounting problems that have come to light at numerous Chinese companies listed in the United States. It is also the second time since last year the SEC has taken enforcement action against the firm for refusing to turn over documents in connection with a Chinese company under investigation. In this latest action, the SEC alleges that Deloitte & Touche Shanghai violated a provision in the 2002 Sarbanes-Oxley Act which requires foreign public accounting firms to provide their work papers concerning companies that trade in the United States to the SEC upon request. A Deloitte spokeswoman had no immediate comment. The firm has previously argued that Chinese law prohibits it from turning over the records. "Without access to work papers of foreign public accounting firms, our investigators are unable to test the quality of the underlying audits and fulfill our responsibilities to investors," said Scott Friestad, an associate director in the SEC's enforcement division. For more than a year the SEC has been probing accounting irregularities and other problems at Chinese companies that are listed on U.S. stock exchanges. The accounting issues have led to the resignations of many of the auditors of these companies, and have also prompted U.S. stock exchanges to delist or halt trading. The SEC has brought at least six cases against U.S.-listed Chinese companies, including Longtop Financial Technologies and Puda Coal. The SEC's first action against the China-based Deloitte unit last year was filed amid allegations that the firm failed to turn over documents in connection with Longtop, which Deloitte Shanghai audited. That case is still pending in a U.S. district court. Last month, Deloitte asked the court to quash the SEC action and force the SEC to go through the Hague Convention process to seek foreign documents before it attempted to use U.S. courts to do so. A hearing in the case is scheduled for next month. In the administrative action filed on Wednesday, the SEC did not disclose which company is at the center of the documents dispute with Deloitte, calling it only "Client A." Link this Share this Digg this Email Reprints

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