Showing posts with label US Securities and Exchange Commission. Show all posts
Showing posts with label US Securities and Exchange Commission. Show all posts

Friday, June 06, 2014

Big four cannot settle China issue - Paul Gillis

Paul Gillis
+Paul Gillis 
The US financial regulator Securities and Exchange Commission tries to reach a deal with the big four accounting firms, writes Compliance Week. But there is very little the big four can do, argues accounting professor Paul Gillis, since this is an issue between governments.

Compliance Week:
Paul Gillis, a professor Peking University and an expert on the audit regulatory environment in China, says he doesn't believe it's possible for the SEC to reach any kind of settlement with the firms. “The Big 4 do not have the ability to cut a deal,” he says. “Any deal has to be between the United States and China.” He says the next best hope for any kind of agreement is at the U.S.-China Strategic and Economic Dialogue in July in Beijing. “But tensions between the U.S. and China are high, which might make a deal more difficult,” he says.
More in Compliance Week.

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Saturday, January 25, 2014

US ruling hurts Chinese clients more than the Big Four - Paul Gillis

Paul Gillis
Paul Gillis
The world´s four largest auditing firms are up in arms, as their China division as the SEC rules against them. But the real victims are their Chinese clients, warns Peking University professor Paul Gillis on his accouting weblog. Not only listed firms, but all companies working with the big four.

Paul Gillis:
As much as the firms are feeling sorry for themselves, it is their clients and the investors in those clients who will be hurt if the firms are banned from practice. A ban could lead to the companies being kicked off of U.S. stock exchanges for failing to produce audited financial statements. IPOs would have to be post-poned until the bans were over. Financings would be delayed. Fortunately appeals are likely to delay this for a long time. 
The effect would not be limited to U.S. listed Chinese companies. A ban from practice before the SEC would not allow the China member firms of the Big Four to do any audit work that is used in connection with a report filed with the SEC. That would preclude the China Big Four from working with their U.S. counter-parts on big U.S. MNCs like General Motors and IBM during the ban. That would increase the risk on MNCs with China operations which is not in anyone’s best interest. 
The SEC tried to head this off. They asked the judge for a lifetime ban on the firms, but wanted it limited to engagements where the China firm does more than 50% of the audit. That idea was obviously designed to make sure the ban did not prevent the firms from working on MNCs. The judge disagreed, putting in place a six-month ban but making it a complete ban on the right to practice. That means the firms cannot work a single hour on MNC clients during the ban. 
That is a bad result, not just for the firms, but also for the capital markets. I hope the SEC commissioners change that when they review the decision. The judge said he could not find a legal justification for a partial ban; I hope the SEC commissioners are more creative.
More at Paul Gillis´accounting weblog.

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