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Author: TMFCogitarius Big gold star, 5000 posts Old School Fool Home Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5162  
Subject: Gang of Five China auditors charged Date: 12/4/2012 5:51 AM
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At last...
'The US financial regulator has charged the Chinese units of five accounting firms - including the so-called Big Four - over refusing to hand over auditing data on China-based companies.

The companies are under investigation by the Securities and Exchange Commission for "potential accounting fraud against US investors".

The nine China-based firms are publicly traded in the US.

An administrative law judge will schedule a hearing on the matter soon.

The five firms are the Chinese affiliates of the Big Four - Deloitte Touche, Ernst & Young, KPMG and PricewaterhouseCoopers - as well as the accounting firm BDO's China unit.'
http://www.bbc.co.uk/news/business-20587401
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Author: Starrob Big funky green star, 20000 posts Old School Fool Ticker Guide Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5140 of 5162
Subject: Re: Gang of Five China auditors charged Date: 12/4/2012 9:50 AM
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So much for people's predictions saying this could never happen.....that the SEC would do nothing.....Seems why I do not invest in certainties but invest in probabilities and this was always a 50/50 coin flip which way it would go in my opinion.





Starrob

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Author: TMFCogitarius Big gold star, 5000 posts Old School Fool Home Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5141 of 5162
Subject: Re: Gang of Five China auditors charged Date: 12/5/2012 12:05 PM
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Another POV, questioning both the timing and the potential fallout:

'The S.E.C.’s position is fair, but futile. Auditors say they can’t give up Chinese documents for fear of accidentally passing on state secrets. The power to release audit work performed in China resides with the securities regulator.

Besides, under China’s loose definitions, auditors don’t always know what is a secret and what isn’t. American and Chinese authorities have been in talks for at least five years on closer co-operation, but with little progress.

By escalating the issue to a 300-day court review, the S.E.C. may just prove that compromise is elusive. The agency is effectively asking Chinese auditors to flout local law, or China to cast off its preoccupation with state secrecy. Neither is plausible. Starting a fight as China prepares to hand over power to new leaders, who may wish to score easy political points by swatting away attacks on the country’s sovereignty, looks especially unwise.'

Now the cost of taking a stand is high. Were the S.E.C. to refuse to accept accounts audited by Chinese firms, it might leave even established Chinese companies with no choice but to delist.

A mass delisting is no longer far-fetched. It might even be welcomed in China, where executives and bankers talk misguidedly about the merits of companies “returning home”. State banks and wealth funds might be happy to help scoop up distressed stakes in companies like Baidu and Sina. As for the S.E.C., it would be left with the moral upper hand, a market free of Chinese accounting risk – and thousands of angry U.S. investors.'
http://dealbook.nytimes.com/2012/12/04/s-e-c-s-fair-but-futi...

I wonder, though, which 'angry investors' he's talking about -- the longs who got suckered in, or the shorts who may thus get shut out of some juicy targets?
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Author: TMFCogitarius Big gold star, 5000 posts Old School Fool Home Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5142 of 5162
Subject: Re: Gang of Five China auditors charged Date: 12/5/2012 12:28 PM
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Looks like Canada's way ahead of the US on this issue:

'Separately, in Canada, Ernst & Young agreed to pay $117.8 million to settle separate shareholder allegations that it misled investors of Sino-Forest Corp., a timber company that filed for bankruptcy protection this year amid questions about its disclosures. The settlement disclosed Monday was the largest ever by an auditor in Canadian history, a plaintiff's attorney said. Ernst & Young didn't admit wrongdoing in the settlement, which must still be approved by the bankruptcy court.

The Ontario Securities Commission alleges Ernst & Young didn't exercise enough skepticism in verifying the ownership and major assets of Sino-Forest. According to the commission, for instance, one Ernst & Young auditor in its Canadian affiliate acknowledged in an email to another auditor that the firm had no way of knowing that the trees the audit firm was inspecting were actually owned by Sino-Forest: "I believe they could show us trees anywhere and we would not know the difference." In addition, the commission said, several of Ernst & Young's senior partners at the affiliate involved in auditing Sino-Forest couldn't read or speak Chinese.

Ernst & Young's Canadian affiliate said it was "confident" its Sino-Forest work had met all standards and that the firm "did extensive audit work to verify ownership and existence of Sino-Forest's timber assets."

Ernst & Young said its settlement with shareholders "is without admission of liability" and "will reduce the uncertainty and future burden on our business, and allow us to focus on our people and our clients." '
http://online.wsj.com/article/SB1000142412788732340190457815...
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