Audit firm ordered to disclose PRC working papers to SFC despite PRC ‘state secrets law’ concerns
On 23 May 2014, the Securities and Futures Commission of Hong Kong (SFC) successfully obtained an order from the High Court of Hong Kong requiring Ernst & Young Hong Kong (E&Y) to produce all audit working papers prepared in connection with its audit of Standard Water Limited (Standard Water), despite concerns raised by E&Y that: (i) disclosing such information would result in E&Y breaching numerous PRC laws, including the state secrets law; and (ii) in any event, E&Y had no right to possession of the relevant documents, the audit having been conducted by Ernst & Young Hua Ming LLP (HM), a sino-foreign co-operative joint venture between Hua Ming Certified Public Accountants and E&Y in China.
Standard Water was incorporated in the Cayman Islands and registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Cap. 32). Its two main operating subsidiaries engaged in the business of water supply and wastewater treatment in the PRC. In 2009, Standard Water applied to list on the main board of the Stock Exchange of Hong Kong Limited. E&Y was engaged as reporting accounting and independent auditor for that purpose.
In March 2010, while the listing application was still pending, E&Y resigned from its role as reporting accounting and independent auditor with immediate effect, citing ‘inconsistencies in documentation’, which led them to conclude they could no longer act. In light of E&Y’s resignation, in April 2010 the SFC issued a direction to investigate whether any market misconduct had been committed, or misleading information disclosed, in connection with the listing application…
Click on the link below to read the rest of the DLA Piper briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from DLA Piper
News from The Lawyer
Briefings from DLA Piper
The Australian Taxation Office released a draft ruling on the Goods and Services Tax treatment of bitcoin transactions on 20 August 2014.
DLA Piper’s ‘Life sciences: patent extension strategies and antitrust global update’ video covers global antitrust and competition issues including product hopping and reverse payment patents.
Analysis from The Lawyer
Cross-border work and political tensions are dominating this year’s entries for Finance Team of the Year at The Lawyer Awards.
Regulators are ramping up the pressure in the aftermath of recession, leaving firms to compete for compliance and restructuring work