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China news new rules for top global audit firms; US SEC sues Deloitte over listed firm's data
SHANGHAI (AP) ' China is issuing new rules requiring that a Chinese citizen heads the mainland Chinese operations of the world's big four auditing companies.
The announcement late Wednesday came as regulators in the U.S. and China clash over the sharing of audit information of mainland Chinese-based companies with shares traded in the U.S.
The Ministry of Finance said in regulations posted on its website that the big audit companies ' Deloitte Touche Tohmatsu, Pricewaterhousecoopers, Ernst & Young and KPMG ' must "localize" their staff in line with laws that specify the qualifications, ages and experience of their management.
The rules take effect by the end of 2017.
On Wednesday, the U.S. Securities and Exchange Commission charged a Chinese unit of accounting firm Deloitte LLP with refusing to hand over documents relating to a Chinese company under investigation for defrauding investors.
The SEC said Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. has not provided audit work papers that the SEC has been trying to obtain for more than two years.
Chinese law prohibits the company from providing certain documents to foreign authorities without prior approval from Chinese authorities. Deloitte said it has requested that approval, but has not received it.
"Deloitte Shanghai is caught in the middle of conflicting laws of two different governments. This is a profession-wide issue and not one that is specific to Deloitte Shanghai," the company said.
The SEC said Deloitte's refusal to provide the documents violates the Sarbanes-Oxley Act. The U.S. law requires foreign public accounting firms to provide audit work papers for companies that issue stock in the United States.
Auditors have been caught in the midst of a crackdown by U.S. regulators on questionable accounting practices by some Chinese companies with shares listed on U.S. markets.
Initially, the big audit companies, which dominate the market, were allowed to use foreign-qualified accountants in their China ventures.