Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. SEC fines Deloitte's China affiliate $20 million for auditing violations

Published 29/09/2022, 16:19
Updated 29/09/2022, 17:55
© Reuters. The headquarters of the U.S. Securities and Exchange Commission (SEC) is seen in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly

© Reuters. The headquarters of the U.S. Securities and Exchange Commission (SEC) is seen in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly

By John McCrank

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission on Thursday fined the Chinese affiliate of Deloitte, one of the "Big Four" accounting firms, $20 million for letting some clients, including foreign companies listed on U.S. exchanges, conduct their own audit work.

Over multiple years, Deloitte's Chinese affiliate asked some clients to select their own samples for testing and to prepare documentation that gave the appearance that Deloitte-China had tested the clients' financial statements and internal controls, when there was no evidence it had in fact done so, the SEC said.

Auditors are essential gatekeepers in the financial markets, with both issuers and investors relying on them to critically and independently examine issuers' financial statements, identify any material misstatements in them, and sign off on them when they are free of material errors.

"We find that Deloitte-China fell woefully short of professional auditing requirements in numerous component audits of Chinese operations of U.S. issuers and audits of Chinese companies listed on U.S. exchanges," said SEC Chair Gary Gensler.

"Investors in U.S. markets should be protected — and have trust in a company's financial numbers — regardless of whether an issuer is foreign or domestic."

The SEC's enforcement action underscores the need for the Public Company Accounting Oversight Board (PCAOB) to be able to inspect Chinese audit firms, Gensler said.

PCAOB inspections help identify weaknesses in firms' quality control processes, which were at the center of the SEC enforcement action against Deloitte-China.

© Reuters. The headquarters of the U.S. Securities and Exchange Commission (SEC) is seen in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly

A China-U.S. agreement last month allows U.S. regulators, for the first time, to inspect China-based accounting firms that audit New York-listed companies, easing an audit dispute that threatened to boot more than 200 Chinese companies from U.S. exchanges.

Deloitte self-reported the violations at its China affiliate to the PCAOB in 2019 upon learning of them, an SEC official said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.