HONG KONG'S markets regulator is taking Ernst & Young to court in an attempt to force it to hand over accounting records related to a former China-based client.
In an unexpected move, the Securities and Futures Commission (SFC) commenced proceedings against E&Y for failing to produce records that relate to its work as the reporting accountant and auditor for Standard Water.
The SFC issued a formal notice to E&Y seeking the audit working papers and underlying accounting documents relating to former client Standard Water.
According to the SFC, Ernst & Young did not comply with the request and claimed it did not have the relevant records which were held in the mainland by its joint venture partner, Ernst & Young Hua Ming, whose staff were the ones involved in the engagement.
"Given Ernst & Young was the reporting accountant and EY Hua Ming was Ernst & Young's agent, the failure to produce these records to the relevant mainland authority on the SFC's request is a matter of serious concern," the SFC said.
In a statement, E&Y said it will endeavor to fully comply with the SFC.
"We will work closely with the relevant regulators, and trust that there will be a quick resolution to enable our full compliance with applicable laws and regulations," E&Y said.
As legal proceedings are underway, E&Y added it would be inappropriate to comment further.
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