1. Case 8.1 Longtop Financial Technologies Limited
a. Discuss the cultural and political factors involved in this case. How did these factors affect the financial reporting and auditing for Longtop?
b. Should major international networks of accounting firms ensure that all national affiliates provide uniform audit services? Explain.
c. Do you believe this situation occurred because of international differences in ethical and moral values? Explain.
2. According to the PCAOB website, in order for their securities to be traded in U.S. capital markets, public companies, whether located in the United States or abroad, must comply with certain U.S. legal requirements, including the requirement to periodically file audited financial statements with the U.S. Securities and Exchange Commission (“SEC”). As required by the Sarbanes-Oxley Act of 2002, the auditor of those financial statements – whether a U.S. auditor or a non-U.S. auditor – must be registered with, and therefore subject to the jurisdiction of, the Public Company Accounting Oversight Board. This includes undergoing regular PCAOB inspections to assess the auditor’s compliance with U.S. law and professional standards in connection with its audits of “issuers,” as defined in the Sarbanes Oxley Act. … Because of the position taken by certain non-U.S. authorities, the PCAOB currently is prevented from inspecting the U.S.-related audit work and practices of PCAOB-registered firms in certain European countries, China, and – to the extent their audit clients have operations in China – Hong Kong.
You may recall from the readings in this and other units, that China has been the source of several frauds and accounting scandals affecting the United States stock markets. Consider the list of issuers whose PCAOB-registered auditors are located in a jurisdiction where obstacles to PCAOB inspections exist – the majority of these are in China and Hong Kong.
(http://pcaobus.org/International/Inspections/Pages/IssuerClientsWithoutAccess.aspx). Looking through that list you will also note that many of these registered firms seem to be Big Fourrelated.
Consider the requirement that Big Four firms in China restructure (http://www.reuters.com/article/2012/05/10/us-china-auditors-idUSBRE84905R20120510).
According to the PCAOB, there appears to be some progress toward audit firm oversight in China. Refer to the MOU with China in the Readings for this unit.
Read this article related to the SEC and Big Four Chinese Affiliates.
http://www.accountingtoday.com/news/auditing/sec-sanctions-big-four-audit-affiliates-in-china73584-1.html

1. Case 8.1 Longtop Financial Technologies Limited a. Discuss the...