25 September 2018

US ruling on accounting big 4 China drags in HK units, WSJ says

A ruling against the Chinese affiliates of the Big Four accounting firms over their refusal to cooperate with US regulators has drawn attention to a questionable practice of some of the firms’ Hong Kong units, the Wall Street Journal reported Monday. Last month, a US judge suspended the Chinese affiliates of PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG and Ernst Young from auditing US-listed companies for six months following the firms’ failure to give to US regulators documents about some of their Chinese audit clients. But in a potential broadening of the issue at hand, the judge also highlighted instances of Hong Kong units of the Big Four acting as official auditors of some companies while outsourcing the bulk of the audit work to their mainland affiliates, the report said. That could raise issues under US auditing rules, which suggest that an audit firm should do a “material” amount of the work to be entitled to serve as a company’s principal auditor and sign the audit opinion, the Journal noted.

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