Chinese Companies Readying for Tough U.S. Audit Rules

Chinese companies listed in the United States are pouring time and money into preparations to comply with Section 404 of the Sarbanes-Oxley Act.


Advertisement


Thousands of executives with financial reporting responsibilities use the Comperio on-line library to access the type of information and interpretive guidance PricewaterhouseCoopers' own professional audit staff use around the world. Key content areas include guidance from the FASB, EITF, PCAOB, SEC, and others as well as PwC's interpretive guidance. Get more information and sign up for a complimentary 30-day trial.


The new rules, which require an audit of internal controls, go into effect July 15, and Chinese companies are scrambling to meet the deadline.

"The stage they're at now is very similar to where U.S. companies were in 2004," said Lester Sussman, the California-based managing director of resources audit solutions for Resources Global Professionals. "The Chinese and Hong Kong companies will benefit somewhat from the experiences of companies in the U.S.,” he told Reuters.

Sussman said some Chinese companies are considering delisting shares in the U.S. because Sarbanes-Oxley expenses could amount to $7 million.

China's economy is expanding greatly every year, and it is now the fourth-largest economy in the world. Almost 450 of the world's Fortune 500 companies are invested in China and have regional headquarters there, the Age of Australia reported.

Meanwhile, one Big Four firm in the U.S. is being investigated for its role in a 2005 scandal involving a Chinese refrigerator maker. Deloitte faces a China Securities Regulatory Commission (CSRC) hearing involving its unqualified audit opinion in 2004 of Guangdong Kelon Electrical Holdings Co.

A Kelon investor has also sued Deloitte under China's three-month-old securities law, China Daily reported. Shanghai's Huangpu People's Court must decide whether to accept the case.

Former Kelon executives were accused of inflating sales and embezzling at least 592 million yuan, or $73 million.

"We are confident that our audit of Kelon adhered in all material respects to the audit standards of China and those of Deloitte," a Deloitte letter to its staff said. "In fact, in this case, we were one of the victims of the fraud carried out by a number of parties both inside and outside the company."

You may like these other stories...

By Jason BramwellThe IRS on August 19 unveiled a new online registration system for financial institutions that need to register with the agency under the Foreign Account Tax Compliance Act (FATCA).Financial institutions...
By Curtis C. Verschoor, CMAThe furor over the extensive tax avoidance measures used by technology companies such as Google and Apple has reached new heights in both the United Kingdom and the United States. Government...
By Jason Bramwell Government leaders of eight of the world's largest economies pledged on June 18 to take a tougher stance on fighting tax evasion. The Group of Eight (G8) leaders, who met in Northern Ireland,...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.