Saturday, June 25, 2011

Sino Accounting

/start sarcasm

I am learn that auditors and the public at large have learned that Chinese accounting standards have been compromised.

/end sarcasm

I have written about Galbraith's retrospect it will be obvious. For now, the pressure is mounting amongst investors who are rightly asking "what, exactly, do I own?"

HONG KONG (Reuters) – The string of accounting problems and stock plunges at publicly traded Chinese groups has sparked deep concerns across the world's biggest audit firms, putting the so-called Big Four on alert from worries that their reputation could be brought down along with a growing list of stricken companies.

Auditing Chinese firms preparing to go public on overseas exchanges is a lucrative business and one that plays into the strengths of the top, international auditing partnerships known as the Big Four: KPMG, Ernst & Young, Deloitte Touche Tohmatsu and PricewaterhouseCoopers.

Yet fears are growing that the struggle to find enough high-quality auditors in China and Hong Kong means it may only be a matter of time until one of the top firms finds itself caught in a blow-up rivaling Enron, which brought down their old rival Arthur Andersen.

"Costs have gone up, fees have gone down, as competition for fees is enormous. You can easily see there is a real risk of an audit firm failing," said Paul Winkelmann, the partner in charge of risk and compliance for PWC in Greater China. According to interviews with professionals at the four firms, each firm is getting more and more cautious about the work they take on from mainland companies looking to IPO. "The whole industry, I will say, is very sensitive and cautious to China IPOs," said an auditor at one of the Big Four, who handles IPO work, who did not want to be named.

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