The Ontario Securities Commission has negotiated no-contest settlement deals with accounting firm Ernst & Young LLP to resolve allegations that the company did negligent work on audits of two Chinese-based companies.
The OSC said Friday its staff have reached agreements with the accounting firm over its audit work at Chinese forestry company Sino-Forest Corp., which collapsed in 2011, and at athletic-shoe manufacturer Zungui Haixi Corp.
Terms of the settlements will not be disclosed until they are approved by OSC commissioners at a hearing scheduled for Sept. 30.
The deal is the OSC's first high-profile settlement using no-contest deals, allowing parties to settle cases without having to make admissions of wrongdoing. The OSC introduced no-contest settlements earlier this year as an option for less serious cases that do not involve criminal activity, arguing the deals would reduce the need for lengthy hearings.
The allegations against Ernst & Young were a rare instance of an audit firm facing prosecution for shoddy work. The OSC alleged the firm was negligent in its audits of both companies, which traded on Canadian stock exchanges until their shares collapsed in 2011 amid allegations of accounting improprieties.
Ernst & Young previously reached settlements in class-action lawsuits filed by investors of both companies, agreeing to pay $117-million to Sino-Forest investors and $2-million to settle claims with Zungui investors.