02 Apr 2018
Global accounting firm KPMG has suffered a major setback in its battle against liquidators of former U.S.-listed healthcare firm China Medical Technologies Inc, whose executives have been charged in the U.S. with defrauding investors out of over $400 million.
The China Medical case is the most high-profile and closely watched contest in years over the production of Chinese audit work papers, an issue that has put Hong Kong and U.S. regulators at loggerheads with China – and at one point threatened to leave U.S.-listed Chinese firms unaudited and in danger of delisting.
In a previously unreported ruling made last week, Hong Kong’s High Court rejected a KPMG procedural request that would limit the time in which China Medical liquidators can pursue claims against KPMG for losses and damages for its audits of the now-defunct company.
The ruling also paves the way for proceedings on a contempt summons brought against 91 KPMG partners and former partners issued in November for refusal to comply with a High Court order to produce China Medical’s audit work papers.
A substantive hearing on that action is widely expected later this year.
KPMG and mainland associate KPMG Huazhen have refused to comply with a 2016 Hong Kong High Court order to provide copies of audit work papers to Borrelli Walsh Ltd, China Medical’s liquidator, arguing it would violate China’s national security laws.
Deputy High Court Judge Anthony To, in last week’s decision, wrote that KPMG’s refusal to hand over the papers made it “extremely difficult” for liquidators “to determine whether or not to commence proceedings against KPMG”.
– By Reuters, 30 March 2018
Link here to the Reuters article
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet