The Securities and Exchange Commission brought an
administrative proceeding against the Chinese affiliates of five major CPA
firms, including the “Big Four,” in 2012. Chinese companies had raised billions
of dollars on American (and Canadian) exchanges only for the share prices of
the companies to plummet due to questions about bookkeeping and disclosures.
The SEC alleged that the CPA firms in China refused to hand over documents in
connection with the investigation of alleged accounting frauds at nine Chinese
companies. The SEC maintained that firms that audit U.S.-traded companies must
follow U.S. law, and the Sarbanes-Oxley Act requires foreign audit firms to
hand over documents about U.S.-listed clients at the SEC’s request. SEC
Commissioner Luis Aguilar said that the investigations “have been hampered by
the lack of access to relevant documents.” For their part, the CPA firms in
China (affiliates of American-based CPA firms) pointed out that their audit
papers are treated like state secrets in mercantilist China, and that the
auditors could therefore be imprisoned for handing the material over a foreign
government without permission from the Chinese state.
The full essay is in Cases of Unethical Business, available at Amazon.com.
The full essay is in Cases of Unethical Business, available at Amazon.com.
