September 23, 2020

Deloitte refuse to hand over documents from Cayman Island’s registered Chinese firm


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Deloitte may be banned from practicing with publicly listed American companies, if it loses a legal  battle in the United States.

The Securities and Exchange Commission has ordered a legal action against the Big4 firm in connection with its refusal to hand over information and documents connected to the American investigation against Longtop Financial Technologies, a Chinese firm registered in the Cayman Islands accused of fraud. Trading in shares of Longtop was suspended at the New York Stock Exchange last year.

According to the SEC, Deloitte has willfully failed “to provide audit work papers despite its legal obligations” after the Commission requested the documents.

Deloitte has maintained its defence by stating that it is “caught in the middle of conflicting laws of two different governments,” according to a statement by the firm. “Accounting firms in China are not permitted to produce documents directly to any foreign regulator without Chinese government approval,” the firm said.

Previously, Deloitte’s lawyers had told the SEC that the Commissions demands could force Deloitte to violate Chinese laws regarding state secrets that would result in the firm facing criminal charges in China, “which can include lengthy prison sentences,” according to the firm.

In May 2011, Deloitte quit as the company’s auditor after stating that Longtop managers had falsified accounting statements.

Deloitte has publicly requested a “diplomatic” solution to the issue.

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