SEC subpoenas Deloitte Shanghai after client fraud

DELOITTE SHANGHAI may be dragged to court by US regulator the SEC after it failed to turn over documents relating to an audit that sparked the firm’s resignation as auditor.

Longtop Financial Technologies Limited was de-listed on the US stock market after Deloitte uncovered evidence of fraud and warned the previous year’s audit report could not be trusted.

The SEC issued a subpoena for the relevant documents in May this year and Deloitte had until 8 July to comply.

Director of the watchdog’s division of enforcement, Robert Khuzami, said: “Compliance with an SEC subpoena is not an option, it is a legal obligation … recipients who refuse to comply should expect serious legal consequences.”

This is the latest in a series of audits that have laid bare questionable accounting practices at China-based companies on the US stock exchange, leading to a spate of auditor resignations and de-listings.

Related reading