Dec 12, 2012

US authorities playing hardball with auditors in China

US authorities have formally accused the major accounting firms' China branches over their auditing practices. Beijing-based freelancer Kway Teow delves into the murky world of Chinese auditing.

After a year of grumbling, the US Securities and Exchange Commission last week formally accused the Big Four accounting firms’ China branches of refusing to co-operate with its investigations into nine Chinese companies listed on US exchanges — a decision that may have far-reaching implications.

The firms — Ernst & Young, Pricewaterhouse Coopers, KPMG and Deloitte Touche Tohmatsu, along with BDO — are charged with non-compliance of SEC requests to share work papers, the supporting documents for the conclusions reached in an audit that detail everything from cash balances in a bank to the number of trees in inventory. If a company lists an asset, an auditor goes out to the company or one of its storage facilities to eyeball the asset, make sure it exists and count it before jotting it down in a work paper.

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