I previously wrote about how Bank of China’s refusal to turn over customer bank records in a case involving counterfeiters is similar to the Big Four accounting firms refusing to submit to PCAOB inspections. Both situations involve Chinese firms refusing to comply with US law citing conflicting Chinese laws.
The judge in the Bank of China case was unmoved by arguments that the bank could not turn over documents because Chinese law forbids doing so. He has now imposed a $50,000 a day fine against the Bank of China. The Bank of China has appealed. The judge has done exactly what the PCAOB should do.
Fines at $50,000 per day amount to $18,250,000 per year. In 2012, PwC China (the largest of the Big Four in China) earned $74 million from auditing US listed Chinese companies. Obviously they can afford the fine, although it would likely make this work unprofitable for them. What it would do is resolve the issue. The Big Four would either get out of the market or convince Chinese regulators to find a compromise. I expect the latter.