August 21, 2018

SEC, China Will Probably Compromise Over Big 4 Chinese Affiliates Someday, Says Guy

The SEC's move against the Big 4's Chinese affiliates on Monday has people all worked up. On the one hand, yes, if the SEC were to delist a lot of Chinese companies that would make a lot of people sad. Also, if fewer Chinese companies were to consider accessing U.S. markets because they aren't so interested in complying with U.S. securities law, that would make a lot of people sad. Of course, lots of people have been all sad face when they lost money thanks to many Chinese companies' suspect financial reporting. 

The problem we have is that China pretty much does whatever the hell it wants to do and the SEC sucks. Futhermore, the accounting firms aren't any help because they're all like, "We can't give you these work papers because that would break Chinese law, but we hope you guys can work things out because, you know, international business harmony, something something." 
 
Okay, they're playing dumb but you kinda have to see their point because if you break Chinese law on the wrong day, things could end up going very, very badly for you. Nobody wants to see auditors die. Not even ones at BDO.
 
So yeah, it's a doozy, but at least one guys is confident that things will get worked out, you know, at some point:   
Citi’s Ravi Sarathy writes that based on such talks he expects a compromise solution “between US and China authorities around and ability to inspect the audit process and controlled access to audit documents.” 
 
But the bad news: The issue will linger for the next 10 months and perhaps longer, resulting in increased volatility in the secotr [sic]. Negotiations could be further slowed given the leadership changes not just in the Chinese government but also the SEC. 
Let's adjust our expectations accordingly.
 

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Face It People, Nothing Much Can Be Done About the Revolving Door

Revolving_Door2.jpgThere’s constant conspiracy theories bellyaching about certain companies getting their former big shots into public service and regulatory positions (we’re talking about you, Maxine Waters).
Well now there’s speculation about former Big 4 partners working at the IASB.
We get it, those who used to work at the big firms shouldn’t be writing the rules. So who the hell is going to do it? Shall we have the likes of Friehling & Horowitz appointed as the standard setters?
The large firms have the biggest pool to choose out of, so natch they’re going to have some of the better candidates to delve into this wonky rule-writing stuff. We’re probably lucky that there are people out there that actually want to serve on these boards, lots of Big 4 partners can barely turn on their computers.

SHOCKER: Doesn’t Appear that Stanford Auditors were Doing Any Auditing

allen-stanford_1018295c.jpgLast week’s indictment of Allen Stanford has brought up the always popular question when fraud, occurs: “Who are the auditors that were asleep at the wheel of this disaster?”
Well, in this case, the auditors were a local UK two-person shop, CAS Hewlett, which must be Queen’s English for Friehling & Horowitz.
It doesn’t appear that CAS Hewlett has a website, but they’ve been doing the Stanford “audits” for at least 10 years, so obv they’re legit. PwC and KPMG both have offices on Antigua but Stanford preferred to stay with its “trusted firm”. Totally understandable.
And the best part? The founder of the firm, Charlesworth “Shelly” Hewlett died in January, approximately a month before the story broke on the Ponz de Stanford.
This all adds up to who-the-fuck-knows if audits were even occurring and for us to speculate if Shelly needed to get got because Stan knew that the poo and fan were coming together. Just sayin’.