On May 9, 2012, the SEC announced an enforcement action against Deloitte Touche Tohmatsu CPA Ltd. ("DT Tohmatsu") for not providing audit work papers related to an unnamed China-based company under investigation for potential accounting fraud against U.S. investors. While this marks the first time the SEC has brought an enforcement action against a foreign audit firm for failing to comply with a Section 106 request under the Sarbanes-Oxley Act of 2002 (Sarbanes- Oxley), it is not the first time the SEC has brought an enforcement action against DT Tohmatsu for refusing to release documents related to an SEC fraud investigation. In September 2011, the SEC filed a subpoena enforcement action against DT Tohmatsu for failing to produce requested documents in connection with the SEC's investigation of Longtop Financial Technologies Limited. The SEC later filed charges against Longtop.
Sarbanes-Oxley requires foreign public accounting firms to provide audit work papers regarding U.S. issuers to the SEC upon request.
DT Tohmatsu has refused to provide audit work papers to the SEC based on its interpretation of Chinese law which it believes prevents it from doing so.
Robert Khuzami, Director of the SEC's Division of Enforcement has stated, "As a voluntarily registered U.S. public accounting firm, D&T Shanghai cannot benefit from the financial and reputation awards that come with auditing U.S. issuers without also meeting its U.S. legal obligations." Mr. Khuzami further noted, "Foreign firms auditing U.S. issuers should not be permitted to shield themselves from regulatory scrutiny to the detriment of U.S. investors."
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