EY's Notice of Appeal relates to documents held by EYHM, EY's agent in carrying out specific audit activities as part of EY's engagement as reporting accountant and auditor of Standard Water Limited.
The disc of documents produced to SFC were found by EY on various hard drives in its Hong Kong office on the eve of the trial in this case, in March 2013, when production of the documents were refused by EY on the basis that the hard drives belonged to EYHM.
EY had argued during the trial that it was prevented from producing audit working papers held by EYHM because of restrictions under PRC law. SFC argued and the court accepted that PRC law does not prohibit the production of these documents and there is no blanket prohibition against their production under PRC law.
SFC also argued that EY had not done anything to follow the process under PRC law for obtaining clearance of these documents. EY has informed the SFC that it has provided these documents to China Securities Regulatory Commission (CSRC) as part of this process.
My comments/queries:
- Why didn't EY seek the clearance from CSRC earlier when dealing with SFC (given that the communication between CSRC and SFC is so fantastic)?
- While those PRC authority figures can see no difference between "without legal basis" and "illegal", is "PRC law does not prohibit" really a protection for EY?
