By Rachel Armstrong
Jan 8 Accounting giant Deloitte has asked a
federal judge to reject a request from the U.S. securities
regulator to resume a court case in which it is trying to force
the auditor to hand over work papers from its audit of an
allegedly fraudulent Chinese IT company.
The move is the latest in a standoff between the Securities
and Exchange Commission (SEC) and audit firms over access to
accounting documents of U.S.-listed Chinese companies suspected
The SEC wants Deloitte to supply documents relating to its
audit of Longtop Financial Technologies Ltd but the
auditor says it is barred from doing so by Chinese secrecy laws.
The regulator asked for the case to be reopened last month
following a six-month hiatus while it tried, but ultimately
failed, to reach a diplomatic solution through negotiations with
the China Securities Regulatory Commission (CSRC). The case
began in May 2011.
Deloitte filed papers late on Monday, arguing that the case
should be postponed pending the outcome of new action taken by
the SEC against it and four other audit firms for securities
violations related to their refusal to provide Chinese audit
The auditor also argued that the SEC's difficulties are
partly of their own-making.
"The SEC has long been aware that the CSRC forbids
China-based audit firms to produce audit work papers directly to
the SEC, and yet the SEC chose to allow China-based companies to
sell securities in the United States despite those
restrictions," Deloitte wrote in the papers.
U.S. stock markets were rocked by a string of accounting
scandals at China-based companies in 2010 and 2011, but the SEC
has struggled to take any action because it is unable to access
evidence, such as audit work papers, kept in China.
When the regulator asked last month for the case against
Deloitte to be resumed, it said that the CSRC "remains unwilling
or unable to provide the SEC with meaningful assistance in its
Longtop was delisted from the New York Stock Exchange in
2011 for failing to meet listing standards, and the SEC opened a
probe into the firm for alleged accounting irregularities.