* Deloitte said to cite falsity in records, interference
* CFO Palaschuk recently quit Renren board
* Longtop's records questioned by Citron, OLP
* Shares of Longtop halted since May 17 (Adds details, Deloitte comment, paragraphs 2, 12)
By Jonathan Stempel and A. Ananthalakshmi
NEW YORK/BANGALORE, May 23 (Reuters) - (Reuters) - The auditor at Longtop Financial Technologies Ltd LFT.N quit and a U.S. regulator has opened a related probe, deepening concern about possible accounting irregularities at Chinese companies.
The resignation on Sunday of the auditor, Deloitte Touche Tohmatsu CPA Ltd, came three days after Longtop, which makes software for Chinese financial services companies, said its chief financial officer offered to resign.
Based in Xiamen, Longtop had a $1.08 billion market value before a May 17 trading halt in New York, though that value had fallen by more half since November.
It is among the largest of several Chinese companies -- such as China MediaExpress Holdings Inc CCME.PK -- that were hit recently by accusations of accounting fraud, including from short-sellers or regulatory probes. [ID:nN06271838] [ID:nN22286378]
According to Longtop, Deloitte said its resignation stemmed in part from "recently identified falsity" in Longtop's financial records, as well as "deliberate interference" by Longtop management in the audit process.
Longtop also said Deloitte could no longer rely on its prior audit reports for the company.
Separately, Longtop said the U.S. Securities and Exchange Commission has opened an inquiry. It intends to cooperate, and has hired legal counsel and authorized the hiring of forensic accountants to examine matters raised by Deloitte.
Longtop said it is also considering whether to accept the resignation of CFO Derek Palaschuk, offered on May 19.
Palaschuk said he quit the board of Renren Inc (RENN.N) three weeks ago, just before it went public on May 4, to protect the Chinese social networking company from any fallout from accounting fraud accusations at Longtop. [ID:nN02237672]
"It doesn't appear that Chinese companies have withstood the types of scrutiny by auditors that American companies have faced -- for decades," said Richard Riley, an accounting professor at the West Virginia University College of Business & Economics in Morgantown, West Virginia.
"As these companies get bigger, they get more attention, and inconsistencies, anomalies or things that don't make sense may become more apparent," he said.
Neither Longtop nor Palaschuk returned requests for comment. Deloitte had no immediate comment. SEC spokesman John Nester declined to comment.
In an April 27 letter, SEC Chairman Mary Schapiro said that since December the regulator revoked registrations for eight China-based companies, and that since March more than 24 such companies revealed auditor resignations or accounting problems.
The SEC has created a task force to probe fraud by non-U.S. companies listed on U.S. exchanges. [ID:nN04270845]
Longtop went public in 2007 in an offering led by Goldman Sachs Group Inc (GS.N) and Deutsche Bank AG (DBKGn.DE).
Its shares last traded on May 16 at $18.93.
Christopher Shutler, a William Blair & Co analyst, wrote that Deloitte's resignation should "weigh heavily" on shares of other China information technology services companies it audits, including Camelot Information Systems Inc CIS.N, HiSoft Technology International Ltd HSFT.O, iSoftStone Holdings Ltd ISS.N and VanceInfo Technologies Inc VIT.N.
These companies' shares fell between 6.4 percent and 9.6 percent on Monday, Reuters data showed. Shares of HiSoft fell 9 percent, but rose after-hours as the company reported quarterly revenue that exceeded analyst forecasts. [ID:nASA027EU]
HiSoft spokeswoman Jessica Cohen and iSoftStone spokeswoman Kathy Li declined to comment. The other companies did not answer requests for comment.
Longtop's finances have been called into question by the research firms Citron Research and OLP Global LLC.
Citron said the company inflated margins, while OLP said Longtop underpaid employee benefits.
On Monday, Longtop said it does not know when it will release results for its fiscal fourth quarter ended March 31. It also named Wei Dong, a senior vice president, as its chief operating officer. (Additional reporting by Brenton Cordeiro in Bangalore. Editing by Maju Samuel, Robert MacMillan, Gary Hill) (firstname.lastname@example.org; outside U.S. +91 80 4135 5800; Reuters Messaging: email@example.com; firstname.lastname@example.org +1 646 223 6317; Reuters Messaging: email@example.com))