in practical terms...means very little to dang and we longs. For starters...the ruling is now subject to appeal and while those times can vary I'd say it's probably going to be 18 mos to 2 years for that process.
And then....even if the big 4 lost that appeal...the suspension is 6 months. This likely wouldn't impact dang for the 2013..2014 or even 2015 even if the auditors lost their appeal. (dang uses E+Y last I knew). And THEN..with the suspension only 6 mos...it might not impact them even in the year it were imposed even if they lost. And THEN...this only applies to the big 4 firms. Dang could always choose to use a new auditor outside the big 4. The reality of this news is that it's more politics than anything...not something that has any practical application. I think the SEC is doing this now because of the planned alibaba IPO. That's who it might hurt ...any companies planning on coming to market soon...as it would cast doubts over them and cause a warning to be part of their prospectus's. It would also hurt bigger companies more because they're less likely to be able to use other accounting firms. This is probably going to be an issue that has no resolution. Because the big 4 simply can't disclose what the SEC wants due to china secrecy issues and the SEC trying to make them isn't going to change that. Investors will have to carry on making their own decisions about a company and their financial status. I've never seen anything with dang that caused me concern and actually their "warning" last Quarter pointed towards their honesty I think. This is not a Chinese scam. Dang has a very long track record and has a great future. And so that is what should guide an investors decision.
Sentiment: Strong Buy
So instead of being audited by accounting firms who are reputable, I guess the SEC prefers audits by no name accounting firms that no one can trust. The fact that their audit was done by Ernst and Young versus Albert Wong or some other small firm is a positive. The SEC should be cracking down on the no name accounting firms versus the good one. Of course, it is a lot easier to go after someone like E & Y who has good clean records versus some of the smaller less reputable firms.
oddly, the SEC did the same thing in 2012 and all these stocks are up 100% from there...
The Securities and Exchange Commission announced charges Monday against the China affiliates of the "Big Four" U.S. accounting firms.
The SEC accused PricewaterhouseCoopers Zhong Tian, KPMG Huazhen, Ernst & Young Hua Ming and Deloitte Touche Tohmatsu of refusing to hand over auditing documents related to Chinese firms that trade on U.S. markets. China's BDO China Dahua Co. Ltd. was also charged.
Regulators say they've been trying for months to gain access to audit documents for nine China-based companies that they've been investigating for potential wrongdoing.
"Only with access to work papers of foreign public accounting firms can the SEC test the quality of the underlying audits and protect investors from the dangers of accounting fraud," Robert Khuzami, director of the SEC's enforcement division, said in a statement.
Accounting fraud by China-based companies has been a hot topic in the past few years, with short sellers publicly lobbing allegations at firms like Sino-Forest, a Toronto-listed company that subsequently faced a massive sell-off of shares last year before trading was suspended.
Related: Muddy Waters slams 'Enron-like' firm
This isn't the first time the SEC has taken action against the audit firms. In May, the agency filed charges against Deloitte Touche Tohmatsu in an effort to force the firm to turn over documents related to an SEC investigation of one of Deloite's China-based clients. That case is ongoing.
Deloitte, PricewaterhouseCoopers-China and Ernst & Young Hua Ming blame the dispute on conflicting rules in China and the United States.
Under Chinese law, "accounting firms in China are not permitted to produce documents, including audit work papers, directly to any foreign regulator without Chinese government approval, so all firms in China have been unable to produce documents requested by the SEC," Deloitte spokeswoman Lauren Mistretta said.
Can't blame the SEC really. They're trying to do their jobs and investigate companies that are fraudulent and if they can't get these documents it makes that hard to do. But to go after these audit firms for complying with Chinese laws is going after the wrong source of the problem and this is instead a political issue to be resolved. I actually think the timing of all this is really meant to coincide with the planned alibaba IPO. IPO's are what is being hurt most with this ruling and with that expected to be upwards of a 100 Billion dollar deal the SEC knew they could put some real heat on the Chinese to change these rules. But again though..the real world impact on Dang is minimal at best. 2013..2014 and likely 2015 isn't going to be impacted and with this being just a 6mos issue unless this action were renewed then future years won't be impacted either. And as I noted...they can simply change auditors. This is going to be a tough problem to resolve as the heart of the issue is really the Chinese political system. While the SEC knows they 're unlikely to be changing that anytime soon they do know that with this ruling they can impact a monster sized IPO like the alibaba one. That then has further ramifications to companies like Yahoo who own 20% of them or so. And this rule also impact virtualy every big multi national with operations in china because surely they all use these firms to audit their Chinese business. As for dang..i think we'll quickly move past this.
Sentiment: Strong Buy
yeah, but it adds "fear and doubt". not a good combination in this market environment. investors loathe fear and doubt. but, that's when there is money to be made!
Tommy, it only adds fear and doubt if it's spun the way the media (paid by shorts and hedge funds) spun it. This announcement, if aimed at SBUX, NFLX, CMG, PCLN,,,, any of the darlings, would have been spun completely differently or ignored totally, and those stocks would have reacted positively.
More evidence of spin? SBUX announced earnings Thursday night....missed earnings and revenue, and already has a PE of 7500. Results were spun into a positive and stock was up 2% yesterday.