In a first of its kind ruling, Hong Kong High Court Justice Peter Ng has ordered Ernst & Young Hong Kong to give the city’s Securities and Futures Commission audit papers for a Chinese water treatment company that the accounting firm said it couldn’t because of Chinese laws, according to Bloomberg.
Justice Ng also rejected the accounting firm's contention that Chinese state secrecy laws prohibits the mainland partner of the firm previously known as Ernst & Young from passing on documents related to a former China client, reports Reuters.
“The objection based on state secrets or commercial secrets is a complete red herring,” the judge said, ordering the firm to pay the SFC’s costs.
EY will review and consider the judgment carefully before deciding if it will appeal, spokesman Terence Ng said.
“Auditors should not withhold information which is in their possession and sought by the SFC in connection with suspected misconduct in Hong Kong’s markets,” said Ashley Alder, the SFC’s chief executive officer.
The SFC brought the case to court in 2012, seeking access to documents related to EY's unfinished audit of Standard Water that scrapped plans for a 2010 initial stock sale in Hong Kong. EY resigned in 2010 as the auditor of Standard Water Ltd., which applied to list in Hong Kong in November 2009 and withdrew its application after the accounting firm's resignation.