The Securities and Exchange Commission has filed a joint motion with Deloitte Touche Tohmatsu CPA Ltd. to dismiss without prejudice a subpoena enforcement action that the SEC had filed in 2011 after Deloitte’s Chinese affiliate failed to produce audit work papers for one of its clients in China, Longtop Financial Technologies, whose securities trade in the U.S.

D&T Shanghai was Longtop’s auditor since at least 2007, but in May 2011, D&T Shanghai resigned as Longtop’s auditor after discovering numerous improprieties during an audit for the year ended March 31, 2011. In its resignation letter, which was included in a Form 6-K furnished by Longtop on May 23, D&T Shanghai identified numerous indicators of financial fraud at Longtop and determined that D&T Shanghai’s prior-year audit reports for Longtop could no longer be relied upon by investors.

The SEC originally issued a subpoena for the audit work papers in May 2011, and D&T Shanghai was required to produce the vast number of documents it held by July 8, 2011. But D&T Shanghai did not produce any documents to the SEC, citing Chinese laws. Deloitte Touche Tohmatsu had argued that it was prohibited under Chinese law from producing the requested documents, which are located in China, to the SEC.

The SEC later began administrative proceedings in December 2012 against the Chinese affiliates of Deloitte and the other Big Four firms, along with BDO, for failing to produce audit work papers and other documents related to China-based companies under investigation by the SEC for potential accounting fraud against U.S. investors. The SEC and the Public Company Accounting Oversight Board have been meeting with Chinese officials in recent years to try to resolve the impasse over gaining access to audit work papers at Chinese auditing firms and conducting inspections of them.

On Monday, the SEC said the Chinese government has provided the agency with a substantial volume of documents in the Longtop case, including the audit work papers, and it is filing a joint motion with Deloitte Touche Tohmatsu to dismiss the subpoena enforcement action. The dismissal of the proceeding is subject to the approval of the district court where the subpoena was filed. Deloitte first handed over the documents to the China Securities Regulatory Commission in response to the SEC’s request for assistance in August 2012. Chinese officials eventually turned over the documents to the SEC.

The SEC said that in light of the substantial number of documents produced, the cooperation that the China Securities Regulatory Commission recently has provided to the SEC with respect to Longtop, and Deloitte’s statement that it will continue to cooperate with the Chinese securities regulator’s requests for Longtop-related documents, the SEC does not believe there is presently a need for judicial relief with respect to the subpoena. However, the SEC cautioned that it is possible it may later determine that it needs the court’s assistance and accordingly, the SEC, joined by Deloitte Touche Tohmatsu CPA Ltd., is requesting an order dismissing the proceeding without prejudice.

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