一
位會計專家說﹐隨著中美兩國在會計操作方面的分歧達到了危險的程度﹐在美上市的中國企業出現大規模退市潮的可能性越來越大。北京大學會計學教授、出版過金融類書籍的作者吉利斯(Paul Gillis)認為﹐避免中國在美上市企業出現大規模退市這一最壞情況的可能性正在迅速降低。
在他看來﹐中國企業不得不從美國退市的可能性為80%。今年6月﹐他曾認為出現這一結果的可能性為20%﹐採取拖延策略的可能性為70%﹐而且中美兩國監管機構會找到推遲解決這一問題的辦法。
吉利斯說﹐現在的處境十分艱難﹐因為有跡象表明外交努力已經失敗。
美國證券交易委員會(Securities and Exchange Commission﹐簡稱SEC)週一對美國“四大”會計師事務所及德豪(BDO)的在華合作所提起訴訟﹐稱它們拒絕提交審計文件的做法違反了美國證券法規。
“四大”指的是安永(Ernst & Young)、普華永道(PricewaterhouseCoopers)、德勤(Deloitte Touche Tohmatsu)和畢馬威(KPMG)。
SEC 指控稱﹐上述會計師事務所違反了《薩班斯-奧克斯利法案》(Sarbanes-Oxley Act)。該法案要求在美國上市的外國企業須聘請在美國上市公司會計監管委員會(Public Company Accounting Oversight Board﹐簡稱PCAOB)備案的審計機構。
PCAOB通過檢查審計機構的審計報告對備案審計機構實施監管。然而自2009年以來﹐中國便禁止在華審計機構與海外監管機構共享審計報告。這些在華審計機構為在美上市的中國企業提供審計﹐且在PCAOB備案。
中國官員堅稱﹐這類信息的共享會違反中國有關國家機密的法律。
麥格理(Macquarie)的分析師表示﹐中國之所以不願將這類信息共享﹐可能與國家主權以及外國政府不應到中國境內監管中國公民這一觀點有關。
吉利斯說﹐美中兩國監管機構上週召開的會議是避免監管對抗的最後機會﹐雙方現今處在一個未來不太可能達成協議的十字路口上。
利害攸關
中國企業從美國退市可能產生巨大的金融後果。
據投行麥格理今年7月進行的計算﹐按市值排名﹐在美上市的前200家中國公司發行的美國存托憑證市值總計9,510億美元。
與此同時﹐據麥格理說﹐只在美國上市的中國公司市值總計約為1,010億美元。
吉利斯說﹐SEC提起的訴訟案需要一些時間推進展開。他說﹐接下來可能的一步是行政審判法官評估採取何種制裁措施。這個過程可能需要數月時間。
與此同時﹐PCAOB的章程規定要剔除那些不合規的會計師事務所﹐而修改章程相關規定最長可能需要一年的時間。
據吉利斯說﹐最終的結果是在美上市的中國公司將找不到審計機構對其進行審計﹐無論它們多正直誠實﹐財務狀況多健康。
據吉利斯說﹐至於退市﹐較小的中國企業可能在中國國家開發銀行(China Development Bank)的幫助下退市。他說﹐這些公司可能最終在幾年內重新上市。
很多公司可能會轉板深交所。該交易所適合較小的公司。
據麥格理說﹐香港上市中國國有企業發行的美國存托憑證對應的股票可能會重新打包到亞洲﹐而不會遇到重大結構性障礙。
不過﹐這些變化可能需要數年時間才能完成﹐因為每家公司都可能需要一份另外的上市招股書。
不過﹐一些市場策略師沒有這麼悲觀﹐他們說會計風波中大家的頭腦可能會普遍更加冷靜﹐達成妥協以防有損金融聯繫。
Reorient Financial Markets駐香港的首席策略師帕爾帕特(Uwe Parpart)說﹐他並不知曉任何發行美國存托憑證的較大中國公司存在會計違規行為。
帕爾帕特說﹐這類會計違規行為一直是一些在納斯達克上市的較小中國公司所存在的一個問題﹐但他警告說﹐這類違規行為的規模有點被夸大了。
帕爾帕特說﹐儘管否認存在問題是愚蠢的﹐但美國一些做空機構大大夸大了問題的規模。
Chris Oliver
（本文譯自MarketWatch）
一
迷失在中國的審計舞弊中
報道 2012年12月08日
想像一下，如果你正在對一家公司進行審計，這家公司的主要資產是樹木，公司最終會把這些樹砍倒，出售木材。那麼你願意費力核實這些樹是不是真的為該公司所有嗎？你會確保這家公司展示給審計人員的那些樹，就是它聲稱擁有的那些樹嗎？
對安永(Ernst & Young)的加拿大子公司而言，兩個問題的答案好像都是否定的。
參加此次審計工作的一名安永員工，在寫給同事的電子郵件中問道，“我們怎麼知道”審計人員看到的那些樹“就是這家公司實際擁有的那些樹呢。比如說，
要是他們向我們展示隨便什麼地方的樹，我們也看不出有什麼差別吧？”這位同事的答覆是，是的，“我相信，他們大可以給我們看任何地方的樹，我們不會知道有
什麼不同。”
但這一點並沒有讓安永改變工作流程。它也懶得去查閱那些文件，儘管它知道那些文件對於回答和嘉漢林業(Sino-Forest Corporation)相關的問題至關重要。嘉漢林業的總部位於加拿大，但是業務在中國。
直到2011年夏，嘉漢林業好像都是一個真實的成功案例。它得到了包括瑞信(Credit Suisse)和多倫多道明銀行(Toronto Dominion)在內的承銷商的支持，公司股票價值高達數十億美元。標準普爾(Standard & Poor’s)和穆迪(Moody’s)對該公司的債券評級僅次於投資級。可是後來，一家名為渾水(Muddy Waters)的做空機構稱，它認為該公司的資產被嚴重誇大了。嘉漢林業指派公司的獨立董事組成小組進行調查。不久，他們得出結論，他們甚至無法確定，公 司聲稱所有的是哪些樹，更別說公司究竟是否有這些樹了。
本周，圍繞嘉漢林業的這起案子即將塵埃落定。儘管安永否認自己負有責任，但同意支付1.17億加拿大元，即1.16億美元左右（約合7.22億元人 民幣），就嘉漢林業股東提出的訴訟達成和解。嘉漢林業同意取消破產保護，將其名下資產讓予債權人（不管具體有哪些資產）。嘉漢林業曾試圖尋找買家，一些企 業查閱了相關文件，但卻沒人出價。嘉漢林業究竟有多少木材（如果真的有的話）這個問題，好像依然沒有準確答案。
儘管股東的起訴已經和解，但安永表示，還會針對安大略省證券委員會(Ontario Securities Commission)的新指控進行自我辯護。指控稱安永未能遵循正確的審計流程。證券委員會的訴訟是本周提起的，也正是這起訴訟公開了審計人員之間的電子郵件。
“我們相信，加拿大安永的工作符合《一般公認審計準則》(Generally Accepted Auditing Standards)，達到了所有專業標準，”安永在一份聲明中說，“我們將向安大略省證券委員會提交證據，這些證據將表明，為核實嘉漢林業對木材資產的 所有權，以及這些資產是否存在，加拿大安永的確開展了大量審計工作。”
不管安永做了多麼全面的工作，他們未揭露最關鍵的事實：這些資產是偽造的。
許多國家都會出現舞弊及審計失誤的問題。但是中國的情況很特殊，中國官方似乎無意徹查這種受害人是美國和加拿大投資者的醜聞。就連香港的監管者都對大陸的監管機關表達過不滿。
上周，中國又派出一個代表團赴美，與美國監管機構討論這些問題。據英國《金融時報》(Financial Times)報道，一名中國官員曾面對着香港聽眾表示，應該和其他監管機構分享審計工作底稿。中國本來10年前就同意過這種觀點，但是卻從未兌現過。他 說，“我想我們很快就能找到共享這些底稿的方法。”
美國監管機構早已聽過這種論調。7月，中國證監會主席郭樹清告訴當時的美國證券交易委員會(Securities and Exchange Commission)主席瑪麗·L·夏皮羅(Mary L. Schapiro)說，他認為可以達成協議。結果，中方堅持道，只有美國證交會承諾，不在未經中方許可的情況下，使用中方提供的文件實施執法，中方才會提 供文件。
本周，美國證交會針對其對德勤(Deloitte)在中國的分支機構的指控，向法院提交了文件。這起案件還在審理當中。文件中展示了一個又一個美國 監管機構請求中方提供協助的案例，有的是要求獲得審計工作底稿，有的只是要求證實某家中國公司是否存在。而中方一再說會設法採取一些措施，但不知為什麼， 他們什麼也沒有做。
另外，美國證交會本周還起訴了五家中國會計師事務所，即“四大”和德豪(BDO)的中國分支機構，稱在證交會對九家中國公司分別開展的調查中，這五家會計師事務所拒絕服從證交會的要求，為其提供相關審計工作底稿。
這五家會計師事務所稱，他們夾在中國和美國之間左右為難，他們不能違反中國法律提供文件。這已使得事情陷入僵局。
如果審計人員的工作還靠得住的話，這可能就不是一個問題。但是，在很多案例中，審計人員的工作並不可靠。例如，一連串的舞弊，直到做空機構進行調查 才揭露出來。作為回應，中國已經把至少一名這樣的調查者投入監獄。這種非正式調查的進度似乎也因此放緩。審計人員是在故意支持舞弊行為嗎？可能有些人是， 但他們其實沒有必要那樣做。
美國上市公司會計監管委員會（Public Company Accounting Oversight Board，簡稱“PCAOB”）會長詹姆斯·多蒂(James Doty)上周在巴魯克學院(Baruch College)舉行的一次審計會議上表示，“審計人員腐敗的情況極少。”PCAOB是十年前為了監管這個行業建立的。不過他還說，“審計師只需要轉過臉 去，接受注釋翔實的辯解、只關注相互印證的證據就行了。他們只需要說，‘我不反對’、‘這需要自行判斷’、‘資料並不明確’即可。”
澳大利亞證券監管機關負責人格雷格·梅德柯拉夫特(Greg Medcraft)本周表示，該機構的檢查顯示，澳大利亞的審計水平一直在下降。他說，審計人員沒有得到充分的證據來支撐其結論，而且對於管理層的說法沒有顯示出充分的“專業懷疑精神”。
多蒂的委員會，也和美國證交會一樣，一直在與中國進行大量交涉。溝通過程中時常會出現進展的跡象，然而並沒有跡象表明中方會允許PCAOB與中國監 管部門一起，針對為在美國上市的企業提供審計服務的中國事務所，進行聯合調查。也沒有跡象表明中方會允許PCAOB參與對美國大型跨國公司進行的全球性審 計。
作者本周與他交流時，他顯得十分懊惱。他說，PCAOB仍然在追求達成協議，“承認監管合作會讓投資者受益，中國官方也希望得到全球投資者的信賴和尊重，而這些都可以通過展開聯合調查、同意執法信息共享協議實現。
“不過我們現在正處在十字路口，近期內如果不會達成協議，向我們進行有意義的開放。我們會毫不猶豫地考慮所有適當而必要的替代措施，保護美國投資者。”
如果中國繼續拖延的話，放這樣的狠話之後，也許會有真的動作，但也許不會。況且中國可能真的會繼續拖延。當前人們已經在議論，隨着中國領導層換屆，新一屆官員陸續上任，事情的進展可能又會放緩。
PCAOB可能會收回拒不合作的中國會計事務所的認證，這一舉動會迫使該事務所的客戶停止在美國進行交易。不過如果不經過美國國務院、財政部，甚至 白宮的批准，PCAOB和美國證交會採取這種舉動的可能性不大。此外，也不清楚這樣做對已經持有這些證券的美國投資者能有什麼幫助。
中國新增舞弊案例的數量似乎已經下降，而且這種企業新近上市的情況也很少。這或者是因為美國投資者更加警惕，或者是因為中國企業不想和認為保護投資者很重要的監管機構打交道。
我們大可以想像，中國企業的管理人員在交談時，會聊到美國人原來這麼好騙。
Floyd Norris撰寫的財經評論可訪問nytimes.com/economix閱讀。對安永(Ernst & Young)的加拿大子公司而言，兩個問題的答案好像都是否定的。
相關文章
但這一點並沒有讓安永改變工作流程。它也懶得去查閱那些文件，儘管它知道那些文件對於回答和嘉漢林業(Sino-Forest Corporation)相關的問題至關重要。嘉漢林業的總部位於加拿大，但是業務在中國。
直到2011年夏，嘉漢林業好像都是一個真實的成功案例。它得到了包括瑞信(Credit Suisse)和多倫多道明銀行(Toronto Dominion)在內的承銷商的支持，公司股票價值高達數十億美元。標準普爾(Standard & Poor’s)和穆迪(Moody’s)對該公司的債券評級僅次於投資級。可是後來，一家名為渾水(Muddy Waters)的做空機構稱，它認為該公司的資產被嚴重誇大了。嘉漢林業指派公司的獨立董事組成小組進行調查。不久，他們得出結論，他們甚至無法確定，公 司聲稱所有的是哪些樹，更別說公司究竟是否有這些樹了。
本周，圍繞嘉漢林業的這起案子即將塵埃落定。儘管安永否認自己負有責任，但同意支付1.17億加拿大元，即1.16億美元左右（約合7.22億元人 民幣），就嘉漢林業股東提出的訴訟達成和解。嘉漢林業同意取消破產保護，將其名下資產讓予債權人（不管具體有哪些資產）。嘉漢林業曾試圖尋找買家，一些企 業查閱了相關文件，但卻沒人出價。嘉漢林業究竟有多少木材（如果真的有的話）這個問題，好像依然沒有準確答案。
儘管股東的起訴已經和解，但安永表示，還會針對安大略省證券委員會(Ontario Securities Commission)的新指控進行自我辯護。指控稱安永未能遵循正確的審計流程。證券委員會的訴訟是本周提起的，也正是這起訴訟公開了審計人員之間的電子郵件。
“我們相信，加拿大安永的工作符合《一般公認審計準則》(Generally Accepted Auditing Standards)，達到了所有專業標準，”安永在一份聲明中說，“我們將向安大略省證券委員會提交證據，這些證據將表明，為核實嘉漢林業對木材資產的 所有權，以及這些資產是否存在，加拿大安永的確開展了大量審計工作。”
不管安永做了多麼全面的工作，他們未揭露最關鍵的事實：這些資產是偽造的。
許多國家都會出現舞弊及審計失誤的問題。但是中國的情況很特殊，中國官方似乎無意徹查這種受害人是美國和加拿大投資者的醜聞。就連香港的監管者都對大陸的監管機關表達過不滿。
上周，中國又派出一個代表團赴美，與美國監管機構討論這些問題。據英國《金融時報》(Financial Times)報道，一名中國官員曾面對着香港聽眾表示，應該和其他監管機構分享審計工作底稿。中國本來10年前就同意過這種觀點，但是卻從未兌現過。他 說，“我想我們很快就能找到共享這些底稿的方法。”
美國監管機構早已聽過這種論調。7月，中國證監會主席郭樹清告訴當時的美國證券交易委員會(Securities and Exchange Commission)主席瑪麗·L·夏皮羅(Mary L. Schapiro)說，他認為可以達成協議。結果，中方堅持道，只有美國證交會承諾，不在未經中方許可的情況下，使用中方提供的文件實施執法，中方才會提 供文件。
本周，美國證交會針對其對德勤(Deloitte)在中國的分支機構的指控，向法院提交了文件。這起案件還在審理當中。文件中展示了一個又一個美國 監管機構請求中方提供協助的案例，有的是要求獲得審計工作底稿，有的只是要求證實某家中國公司是否存在。而中方一再說會設法採取一些措施，但不知為什麼， 他們什麼也沒有做。
另外，美國證交會本周還起訴了五家中國會計師事務所，即“四大”和德豪(BDO)的中國分支機構，稱在證交會對九家中國公司分別開展的調查中，這五家會計師事務所拒絕服從證交會的要求，為其提供相關審計工作底稿。
這五家會計師事務所稱，他們夾在中國和美國之間左右為難，他們不能違反中國法律提供文件。這已使得事情陷入僵局。
如果審計人員的工作還靠得住的話，這可能就不是一個問題。但是，在很多案例中，審計人員的工作並不可靠。例如，一連串的舞弊，直到做空機構進行調查 才揭露出來。作為回應，中國已經把至少一名這樣的調查者投入監獄。這種非正式調查的進度似乎也因此放緩。審計人員是在故意支持舞弊行為嗎？可能有些人是， 但他們其實沒有必要那樣做。
美國上市公司會計監管委員會（Public Company Accounting Oversight Board，簡稱“PCAOB”）會長詹姆斯·多蒂(James Doty)上周在巴魯克學院(Baruch College)舉行的一次審計會議上表示，“審計人員腐敗的情況極少。”PCAOB是十年前為了監管這個行業建立的。不過他還說，“審計師只需要轉過臉 去，接受注釋翔實的辯解、只關注相互印證的證據就行了。他們只需要說，‘我不反對’、‘這需要自行判斷’、‘資料並不明確’即可。”
澳大利亞證券監管機關負責人格雷格·梅德柯拉夫特(Greg Medcraft)本周表示，該機構的檢查顯示，澳大利亞的審計水平一直在下降。他說，審計人員沒有得到充分的證據來支撐其結論，而且對於管理層的說法沒有顯示出充分的“專業懷疑精神”。
多蒂的委員會，也和美國證交會一樣，一直在與中國進行大量交涉。溝通過程中時常會出現進展的跡象，然而並沒有跡象表明中方會允許PCAOB與中國監 管部門一起，針對為在美國上市的企業提供審計服務的中國事務所，進行聯合調查。也沒有跡象表明中方會允許PCAOB參與對美國大型跨國公司進行的全球性審 計。
作者本周與他交流時，他顯得十分懊惱。他說，PCAOB仍然在追求達成協議，“承認監管合作會讓投資者受益，中國官方也希望得到全球投資者的信賴和尊重，而這些都可以通過展開聯合調查、同意執法信息共享協議實現。
“不過我們現在正處在十字路口，近期內如果不會達成協議，向我們進行有意義的開放。我們會毫不猶豫地考慮所有適當而必要的替代措施，保護美國投資者。”
如果中國繼續拖延的話，放這樣的狠話之後，也許會有真的動作，但也許不會。況且中國可能真的會繼續拖延。當前人們已經在議論，隨着中國領導層換屆，新一屆官員陸續上任，事情的進展可能又會放緩。
PCAOB可能會收回拒不合作的中國會計事務所的認證，這一舉動會迫使該事務所的客戶停止在美國進行交易。不過如果不經過美國國務院、財政部，甚至 白宮的批准，PCAOB和美國證交會採取這種舉動的可能性不大。此外，也不清楚這樣做對已經持有這些證券的美國投資者能有什麼幫助。
中國新增舞弊案例的數量似乎已經下降，而且這種企業新近上市的情況也很少。這或者是因為美國投資者更加警惕，或者是因為中國企業不想和認為保護投資者很重要的監管機構打交道。
我們大可以想像，中國企業的管理人員在交談時，會聊到美國人原來這麼好騙。
Sorting Out a Chinese Puzzle in Auditing
December 08, 2012
Imagine for a moment that you were
auditing a company whose principal asset was trees that it would
eventually cut down to sell the timber. Would you bother to verify
whether the company actually owned the trees? Would you make sure that
the trees the company showed to your auditors were the same trees it
claimed to own?
To the Canadian affiliate of Ernst & Young, the answer to both questions appears to be no.
How, asked one Ernst staff member involved in the audit in an e-mail
to a colleague, “do we know that the trees” the auditors were being
shown “are actually trees owned by the company? E.g. could they show us
trees anywhere and we would not know the difference?” The answer was
yes: “I believe they could show us trees anywhere and we would not know
the difference,” replied the colleague.
That did not lead Ernst to change its procedures. Nor did it bother to look at documents that it knew were crucial to answering the questions about the Sino-Forest Corporation, which was based in Canada but had its operations in China.
Until the summer of 2011, Sino-Forest appeared to be a real success story, backed by underwriters like Credit Suisse and Toronto Dominion and with shares worth billions of dollars. Its bonds were rated as just under investment grade by Standard & Poor’s and Moody’s. Then a short-selling operation known as Muddy Waters said it thought the assets were greatly exaggerated. Sino-Forest appointed a group of its independent directors to investigate, and in due course they concluded they could not even be sure just what trees the company claimed to own, let alone whether it owned them.
This week brought the Sino-Forest case close to a conclusion. Ernst agreed to settle a shareholders’ suit for 117 million Canadian dollars, or about $116 million, while denying it was liable. The company agreed to come out of bankruptcy with its assets, whatever they might be, owned by the creditors. The company had tried to find buyers, and a number looked at the documents, but nobody bid. There still seems to be no certainty about how much, if any, timber the company owns.
While Ernst settled the shareholder suit, it said it would fight new charges by the Ontario Securities Commission that the audit firm failed to follow proper audit procedures. It was the commission suit, filed this week, that disclosed the e-mails exchanged by the auditors.
“We are confident that Ernst & Young Canada’s work was conducted in accordance with Generally Accepted Auditing Standards (GAAS) and met all professional standards,” the firm said in a statement. “The evidence we will present to the O.S.C. will show that Ernst & Young Canada did extensive audit work to verify ownership and existence of Sino-Forest’s timber assets.”
However extensive the work, the audit failed to uncover the essential truth: the assets were fake.
Frauds, and audit failures, can happen in many countries. But China is a special case because the authorities there seem to be completely uninterested in getting to the bottom of scandals whose victims are American or Canadian investors. Even regulators in Hong Kong have voiced frustration with their mainland colleagues.
Last week China sent another delegation to the United States to talk about these issues with American regulators, and a Chinese official was quoted by The Financial Times as telling a Hong Kong audience that audit working papers should be shared with other regulators — something the Chinese supposedly agreed to a decade ago but had never actually done. “I think we’ll shortly be able to work out a way to deliver those papers,” he said.
The American regulators have heard those stories before. In July, the chairman of the China Securities Regulatory Commission, Guo Shuqing, told Mary L. Schapiro, then the chairwoman of the United States Securities and Exchange Commission, that he thought an agreement could be reached. It turned out that the Chinese insisted they would provide documents only if the S.E.C. promised not to use them in an enforcement proceeding without Chinese permission.
The week the S.E.C. filed court papers, in connection with its pending case against a Chinese affiliate of Deloitte, laying out case after case in which American regulators asked for assistance through obtaining audit work papers or even something as simple as verifying that a Chinese company existed. Repeatedly, the Chinese said something could be worked out, but somehow nothing ever was.
Separately, the S.E.C. this week filed proceedings against five Chinese audit firms — affiliates of the Big Four and of BDO — saying the five firms had refused to comply with S.E.C. subpoenas for audit work papers related to nine separate investigations of Chinese companies.
The firms maintain that they are caught in the middle between China and the United States, and that they cannot violate Chinese law by providing the documents. That has led to a standoff.
This might not matter so much if the auditors were doing decent jobs. But in many cases they have not, as can be seen from the succession of frauds that went undetected until short-sellers investigated. China has responded by throwing at least one such investigator in jail, which seems to have slowed the rate of such informal investigations. Are the auditors deliberately certifying frauds? Maybe some are, but that is not really necessary.
“It is the rare case when an auditor can be corrupted,” James Doty, the chairman of the United States Public Company Accounting Oversight Board, which was established a decade ago to regulate the industry, told an auditing conference at Baruch College last week. But, he added, “An auditor need only look the other way, accept a well-annotated rationalization, focus on corroborating evidence. An auditor need only say, ‘I don’t object.’ ‘It’s a matter of judgment.’ ‘The literature is unclear.’ ”
Greg Medcraft, the chairman of the Australian securities regulator, said this week that the quality of Australian audits, as shown by his agency’s inspections, had been declining. He said auditors were not getting sufficient evidence to support their conclusions and were not showing enough “professional skepticism” regarding what managements told them.
Mr. Doty’s board, like the S.E.C., has been doing a lot of talking to China. Every so often there appears to be progress, but there is no indication that the board will be allowed to take part in joint inspections with Chinese authorities of Chinese audit firms that certify the statements of companies traded in this country, or that take part in worldwide audits of major American multinationals.
When I talked to him this week, he sounded frustrated. He said the board was still pursuing an agreement, “recognizing that investors benefit from regulatory cooperation and that Chinese authorities want the credibility and respect of global investors that will come from conducting joint inspections and agreeing to an enforcement information sharing protocol.
“We are at a crossroads, though, and absent a near-term agreement that gives us meaningful access, will not hesitate to consider all appropriate and necessary alternatives to protect U.S. investors.”
Such tough talk may or may not be followed by real action if China keeps stalling, as seems likely. Already word has spread that the change in Chinese leadership may slow things down as new officials settle into their jobs.
The accounting oversight board could revoke the registrations of uncooperative Chinese firms, a move that would force their clients to stop trading in this country. But it seems unlikely the board or the S.E.C. would take such a step without approval of the State and Treasury Departments, and ultimately of the White House. Nor is it clear how that would help American investors who already own the securities.
The volume of new Chinese frauds seems to have declined, and there are few new listings of such companies — either because American investors have grown wary or because Chinese companies don’t want to deal with regulators who think investor protection is important.
One can only imagine the conversations of Chinese corporate officials as they discuss how gullible Americans turned out to be.
To the Canadian affiliate of Ernst & Young, the answer to both questions appears to be no.
That did not lead Ernst to change its procedures. Nor did it bother to look at documents that it knew were crucial to answering the questions about the Sino-Forest Corporation, which was based in Canada but had its operations in China.
Until the summer of 2011, Sino-Forest appeared to be a real success story, backed by underwriters like Credit Suisse and Toronto Dominion and with shares worth billions of dollars. Its bonds were rated as just under investment grade by Standard & Poor’s and Moody’s. Then a short-selling operation known as Muddy Waters said it thought the assets were greatly exaggerated. Sino-Forest appointed a group of its independent directors to investigate, and in due course they concluded they could not even be sure just what trees the company claimed to own, let alone whether it owned them.
This week brought the Sino-Forest case close to a conclusion. Ernst agreed to settle a shareholders’ suit for 117 million Canadian dollars, or about $116 million, while denying it was liable. The company agreed to come out of bankruptcy with its assets, whatever they might be, owned by the creditors. The company had tried to find buyers, and a number looked at the documents, but nobody bid. There still seems to be no certainty about how much, if any, timber the company owns.
While Ernst settled the shareholder suit, it said it would fight new charges by the Ontario Securities Commission that the audit firm failed to follow proper audit procedures. It was the commission suit, filed this week, that disclosed the e-mails exchanged by the auditors.
“We are confident that Ernst & Young Canada’s work was conducted in accordance with Generally Accepted Auditing Standards (GAAS) and met all professional standards,” the firm said in a statement. “The evidence we will present to the O.S.C. will show that Ernst & Young Canada did extensive audit work to verify ownership and existence of Sino-Forest’s timber assets.”
However extensive the work, the audit failed to uncover the essential truth: the assets were fake.
Frauds, and audit failures, can happen in many countries. But China is a special case because the authorities there seem to be completely uninterested in getting to the bottom of scandals whose victims are American or Canadian investors. Even regulators in Hong Kong have voiced frustration with their mainland colleagues.
Last week China sent another delegation to the United States to talk about these issues with American regulators, and a Chinese official was quoted by The Financial Times as telling a Hong Kong audience that audit working papers should be shared with other regulators — something the Chinese supposedly agreed to a decade ago but had never actually done. “I think we’ll shortly be able to work out a way to deliver those papers,” he said.
The American regulators have heard those stories before. In July, the chairman of the China Securities Regulatory Commission, Guo Shuqing, told Mary L. Schapiro, then the chairwoman of the United States Securities and Exchange Commission, that he thought an agreement could be reached. It turned out that the Chinese insisted they would provide documents only if the S.E.C. promised not to use them in an enforcement proceeding without Chinese permission.
The week the S.E.C. filed court papers, in connection with its pending case against a Chinese affiliate of Deloitte, laying out case after case in which American regulators asked for assistance through obtaining audit work papers or even something as simple as verifying that a Chinese company existed. Repeatedly, the Chinese said something could be worked out, but somehow nothing ever was.
Separately, the S.E.C. this week filed proceedings against five Chinese audit firms — affiliates of the Big Four and of BDO — saying the five firms had refused to comply with S.E.C. subpoenas for audit work papers related to nine separate investigations of Chinese companies.
The firms maintain that they are caught in the middle between China and the United States, and that they cannot violate Chinese law by providing the documents. That has led to a standoff.
This might not matter so much if the auditors were doing decent jobs. But in many cases they have not, as can be seen from the succession of frauds that went undetected until short-sellers investigated. China has responded by throwing at least one such investigator in jail, which seems to have slowed the rate of such informal investigations. Are the auditors deliberately certifying frauds? Maybe some are, but that is not really necessary.
“It is the rare case when an auditor can be corrupted,” James Doty, the chairman of the United States Public Company Accounting Oversight Board, which was established a decade ago to regulate the industry, told an auditing conference at Baruch College last week. But, he added, “An auditor need only look the other way, accept a well-annotated rationalization, focus on corroborating evidence. An auditor need only say, ‘I don’t object.’ ‘It’s a matter of judgment.’ ‘The literature is unclear.’ ”
Greg Medcraft, the chairman of the Australian securities regulator, said this week that the quality of Australian audits, as shown by his agency’s inspections, had been declining. He said auditors were not getting sufficient evidence to support their conclusions and were not showing enough “professional skepticism” regarding what managements told them.
Mr. Doty’s board, like the S.E.C., has been doing a lot of talking to China. Every so often there appears to be progress, but there is no indication that the board will be allowed to take part in joint inspections with Chinese authorities of Chinese audit firms that certify the statements of companies traded in this country, or that take part in worldwide audits of major American multinationals.
When I talked to him this week, he sounded frustrated. He said the board was still pursuing an agreement, “recognizing that investors benefit from regulatory cooperation and that Chinese authorities want the credibility and respect of global investors that will come from conducting joint inspections and agreeing to an enforcement information sharing protocol.
“We are at a crossroads, though, and absent a near-term agreement that gives us meaningful access, will not hesitate to consider all appropriate and necessary alternatives to protect U.S. investors.”
Such tough talk may or may not be followed by real action if China keeps stalling, as seems likely. Already word has spread that the change in Chinese leadership may slow things down as new officials settle into their jobs.
The accounting oversight board could revoke the registrations of uncooperative Chinese firms, a move that would force their clients to stop trading in this country. But it seems unlikely the board or the S.E.C. would take such a step without approval of the State and Treasury Departments, and ultimately of the White House. Nor is it clear how that would help American investors who already own the securities.
The volume of new Chinese frauds seems to have declined, and there are few new listings of such companies — either because American investors have grown wary or because Chinese companies don’t want to deal with regulators who think investor protection is important.
One can only imagine the conversations of Chinese corporate officials as they discuss how gullible Americans turned out to be.
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