finance industry

China fines Deloitte $31 million for auditing negligence


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China fines Deloitte $31 million for auditing negligence

DELOITTE. Visitors visit the booth of Deloitte at a fair in Hangzhou, China, December 12, 2022.

CFOTO/Sipa USA/Reuters

Deloitte's Beijing operations are also suspended for three months

BEIJING, China – China has fined auditing firm Deloitte 211.9 million yuan ($30.8 million) for failing to perform its duty in assessing the asset quality of China Huarong Asset Management Company Ltd, the finance ministry said on its website on Friday, March 17.

Deloitte’s Beijing operations also will be suspended for three months, the ministry said in a statement.

China Huarong and its investment arms were fined for internal governance lapses, risk control failures, and severe inaccuracy of accounting information from 2014 to 2019, the statement added.

Deloitte said it respects and accepts the ministry’s decision, according to a statement published on its website.

“We regret that, in this matter, the MOF (Ministry of Finance) considers certain aspects of our work fell below the required auditing standards,” it said.

Deloitte also said it has not received any information from Huarong that it intends to make any restatement to its past financial statements, and no changes to the relevant audit reports have been found to be necessary.

In a separate statement, Huarong said the company and its seven subsidiaries had received a 100,000-yuan fine each.

The issues it was punished for had no direct impact on its current and future business, Huarong said, adding that it would strengthen internal controls and its risk management system.

The finance ministry said Deloitte had failed to discover the real situation of the underlying assets in its audit and ignored the approval compliance for Huarong’s major investment matters.

The accounting firm did not issue proper audit opinions on the identified abnormal transactions of Huarong, and it did not obtain sufficient and appropriate evidence when it provided auditing services, it added.

Huarong, one of four major state-owned distressed-debt managers, has been in turmoil after it failed to release its 2020 earnings on time. It eventually reported a huge loss.

The company later injected Citic Group as its largest shareholder in a government-led restructuring and has disposed of non-core businesses. –

$1 = 6.8733 Chinese yuan renminbi

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