US judge bars Chinese units of ‘Big Four’

The Chinese units of the global “Big Four” accounting firms should be suspended from practicing in the United States for six months, a US judge ruled.

In a harshly worded 112-page ruling, Securities and Exchange Commission judge Cameron Elliot censured the Chinese affiliates of KPMG, Deloitte , PricewaterhouseCoopers and Ernst and Young.

The four firms said that they intended to appeal against the ruling. “In the meantime the firms can and will continue to serve all their clients without interruption,” the four said in a joint statement.

Mr Elliot, an SEC judge who operates independently, sided with the SEC and said the companies “wilfully” failed to give US regulators the audit work papers of certain Chinese companies under investigation for accounting fraud.

Auditors have refused to turn over such papers for fear of violating Chinese secrecy laws.

Mr Elliot also censured a fifth firm, Dahua, previously a member of the BDO international network, but did not impose a six-month suspension.

The decision is not expected to be disruptive to US-listed Chinese companies relying on these firms to review their 2013 books as the ruling does not go into immediate effect.

However, if the firms are unsuccessful in their appeal, which could last years, then companies would need to find a new auditor during the suspension period or else be unable to file accounts, a move likely to see their shares suspended.

US multinationals with significant Chinese operations such as fast food group Yum Brands, tech firm Qualcomm and construction equipment maker Caterpillar will also be watching the developments closely.

Some companies have been concerned that they could be drawn into the dispute if they use the local units of the Big Four firms to look at their operations in China.

Reuters