In the end, it was the mainland auditor who pointed out the problem in Standard Water's financial papers. It was also the mainland auditor who decided its Hong Kong affiliate should resign, Leung said, even though the audit report was signed by the Hong Kong office.

Leung said Yam consulted him on his concerns before withdrawing from the case. Yam told Leung some company papers dated from 2008 were in fact produced in 2009. Leung agreed with Yam that there were indeed integrity issues. E&Y HK did not review any of the audit papers before it handed in its resignation, said Leung.

In distancing itself from the job, E&Y HK argues that the Hong Kong regulator should not have pressed it for the audit papers given that the mainland affiliate did most of the work and held all the papers. Moreover, it noted the mainland's state secrets laws prevent the affiliate from handing the papers to outside regulators.

The audit industry will be keen to see how persuasive E&Y HK's argument proves to be. This has added relevance in light of US regulators having started a similar battle with the Big Four for audit papers in relation to a large number of mainland companies suspected of accounting fraud.

While we may have to wait some months for the outcome of E&Y HK's court case, we have learned one thing: Sometimes, a signature of a Hong Kong auditor just may not be all that you think it should be.