Chinese units of 5 big US audit firms charged
Representatives for the affiliates of KPMG and BDO could not immediately be reached for comment.
SEC Enforcement Director Robert Khuzami said the agency needs to have access to the documents in order to verify the accuracy of the firms' audits and protect investors from accounting fraud. "Firms that conduct audits knowing they cannot comply with laws requiring access to these work papers face serious sanctions," he said in a statement.
The SEC's case against the firms' affiliates will go before an administrative law judge at the agency. If the judge rules in favor of the SEC, the judge will determine what sanctions the affiliates could face.
In a related action Monday, the Ontario Securities Commission in Canada accused Ernst & Young of failing to conduct its audits of troubled Chinese timberland company Sino-Forest Corp. in accordance with industry standards. Ernst & Young denied the allegations and said it has been cooperating with the regulators.
Sino-Forest was once Canada's most valuable publicly-traded forestry business, but shares plunged last year after short-seller Muddy Waters Research alleged the company exaggerated its assets. The company filed for bankruptcy protection in March and put itself up for sale.
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