DAVOS Switzerland Jan 24 In the midst of a
U.S.-China quarrel over corporate auditing, the global chairman
of audit giant KPMG said on Friday that a "constructive
dialogue" was under way to defuse the dispute, which led days
ago to U.S. sanctions against the Chinese arms of the world's
largest accounting firms.
"We are in dialogue with the Ministry of Finance in China on
the matter," KPMG Chairman Michael Andrew told the
Reuters Global Markets Forum, an online community, in Davos,
Switzerland, during the World Economic Forum meetings.
Months of tension over U.S. regulators' attempts to examine
audits in China of U.S.-listed Chinese companies boiled over on
Wednesday when a U.S. administrative law judge sanctioned the
Chinese units of the so-called Big Four.
The Chinese arms of the Big Four - KPMG, Ernst & Young
, Deloitte & Touche and
PricewaterhouseCoopers - have refused to hand over to
U.S. officials the records of audit work done by the Chinese
units for U.S.-listed Chinese companies.
Fearing that complying with Washington's demands would
violate Chinese secrecy laws and incur Beijing's wrath, the
firms are in the middle of an international standoff that could
escalate and damage U.S.-China economic relations.
The sanctions, imposed by U.S. Securities and Exchange
Commission Administrative Law Judge Cameron Elliot, were
expected and underscored "the need for both governments to
resolve the impasse," Andrew said.
"The four accounting firms are caught in an unenviable
position that if we hand our work papers over, we breach Chinese
law and risk jail terms," Andrew said. "If we don't hand our
papers over we get sanctioned by the U.S. government."
Judge Elliot declared that the Chinese arms of Deloitte &
Touche, PricewaterhouseCoopers, KPMG and Ernst & Young should be
suspended from auditing U.S.-listed companies for six months.
The firms "willfully" refused to turn over audit documents
from China requested by the SEC and deserve little sympathy,
The SEC for years has been trying to get documents from the
firms to investigate a rash of accounting scandals at Chinese
companies whose stocks are listed in the United States.
KPMG's Andrew said the judge's ruling will be appealed by
the firms. The matter could play out for months, or even years,
as it goes before the five-member SEC and moves into the courts.
China's securities regulator said on Friday it deeply
regretted Elliot's ruling. At a regular news briefing, ministry
spokesman Deng Ge said China hoped the SEC "would make the
correct decision" on the case, adding that "the SEC would bear
all the responsibility for consequences of its action."