A US corporate reform law known as Sarbanes-Oxley has become a major compliance issue with mainland companies that are listed or are planning to list in the United States. Accounting firms are benefiting as Chinese companies, including subsidiaries of US listed firms, scramble to comply with the new accounting regulations ahead of the deadline. The Sarbanes-Oxley Act of 2002 was created following major US accounting scandals that led to the collapse of Enron and WorldCom. The Act brings in accounting reforms and requires all US listed companies and their overseas subsidiaries to have proper internal controls in place to prevent corporate frauds and false accounting. Sarbanes-Oxley compliance has become a major business for Deloitte Touche Tohmatsu's mainland operations in the coming year, according to its China chief executive Peter Bowie. Mr Bowie describes the rush to meet Sarbanes-Oxley regulations as the biggest one-off event boosting business for accountants since the Y2K episode. 'As the deadline is looming, we have seen substantial demand from mainland firms and multinational companies on Sarbanes-Oxley compliance,' he said. The deadline for Sarbanes-Oxley compliance is based on the date of the financial year-end of the company. For most Hong Kong and Chinese companies listed in the US, the deadline for them to comply with the new law will be at their financial year ending on December 31. 'The fundamental requirement of the Sarbanes-Oxley Act is that the companies must have controls in place in the financial process. We are helping them identifying what controls [are needed] in their management and financial process and to ensure the control systems are operating effectively.' Mr Bowie said. But, he said, like Y2K compliance, the huge demand over Sarbanes-Oxley would last for only a year as it would become a recurring factor in normal annual audits. Deloitte's other major business lines in China were initial public offerings, merger and acquisitions and taxation advisory, he said. The firm two months ago announced that it would spend US$150 million to expand its China business in the next five years. As part of the expansion, the firm opened its 10th office in China, in Suzhou. 'Suzhou is a rapidly growing place, it has a big industrial park and there more than 3,000 investment projects there,' Mr Bowie said. To cope with the growing business in the greater China region, Deloitte would hire 1,000 staff next year and increase staff numbers to 6,200 by the end of next year, he said. The firm has 1,500 staff each in Hong Kong and the mainland and 2,200 in Taiwan, where Deloitte has taken over the collapsed Arthur Andersen's business. It also plans to open 10 more offices in the mainland, mainly in the inner or western regions as its operations are well-represented in the coastal area. Deloitte has offices in 10 Chinese cities, including Beijing, Dalian, Guangzhou, Hong Kong, Macau, Nanjing, Shanghai, Shenzhen, Suzhou and Tianjin.
