China Fund News Chenxi
Strict regulatory signals continue to be released, and well-known accounting firms have received regulatory fines.
On May 13, the official WeChat account of Dahua Certified Public Accountants issued a statement saying that the Jiangsu Securities Regulatory Bureau imposed administrative penalties on the firm and related personnel in accordance with the law for failing to be diligent and conscientious during the audit of Jin Tongling's annual financial report.
It is reported that Dahua Law Firm has recently sent a letter to the client stating that the administrative penalty will not affect the audit business of the 2024 annual report. However, since the evening of May 12, a large number of listed companies have successively disclosed announcements that they will cancel the reappointment of Dahua as the auditor in 2024, and cancel the relevant proposals in the 2023 annual general meeting of shareholders.
Let's see the details -
UOB's latest statement: deeply saddened and deeply reflected
After the news of "suspended business" and "punishment" came out one after another, on the afternoon of May 13, Dahua issued the latest statement to explain the recent punishment.
Dahua said that on May 10, 2024, the Jiangsu Supervision Bureau of the China Securities Regulatory Commission issued an administrative penalty decision to Dahua Certified Public Accountants (Special General Partnership): for failing to be diligent and conscientious during the audit of the annual financial statements of Jintongling Technology Group Co., Ltd., Dahua and related personnel were imposed administrative penalties in accordance with the law.
Dahua said that it sincerely accepts the penalty decisions of the regulatory authorities, consciously accepts the supervision of various regulatory agencies, corporate customers and all parties in society, and carries out comprehensive rectification as required, and organizes deep reflection throughout the firm.
Dahua said that as a domestic accounting firm with a certain scale and influence after 40 years of development and tempering, the punishment reflects the gap in Dahua's response to the new situation, new tasks and new challenges, and the shortcomings in risk awareness, internal governance and quality control. "We are deeply saddened and ashamed of this, and we apologize to our customers and partners who have been affected by this, and we are deeply grateful to our partners from all walks of life who have given us unwavering support and trust during this difficult period."
Dahua further stated that it will learn lessons, face difficulties, face up to deficiencies, solve problems, and firmly develop confidence, adhere to the bottom line of integrity, adhere to the practice standards, resolutely implement the practice responsibility of financial and accounting supervision, and earnestly perform the duties of the "gatekeeper" of the capital market.
Dahua said that it will fully implement the requirements of the regulators, improve the risk management and control standards, enhance the practice ability and level, and improve the internal governance system and quality management system. "We will always adhere to high standards of service level and audit quality, take serving national construction, social progress, economic development and public interests as our own responsibility, continue to provide higher quality professional services, and repay the expectations of the public and the trust of our customers."
The brokerage involved in the financial fraud of Jin Tongling was suspended from sponsoring business for 6 months
This time, Dahua was fined by the Jiangsu Securities Regulatory Bureau, which involved the financial fraud case of Jin Tongling.
In April 2023, Jin Tongling announced that in the process of preparing the 2022 financial statements, due to the excessive amount of performance pre-loss, the company's financial situation was self-examined, and it was found that there were major errors in the previous period and retrospective adjustments were made. After retrospective adjustment, Jin Tongling reduced the undistributed profit at the beginning of 2021 by a total of 468 million yuan, and the net profit in 2021 was adjusted from 19.863 million yuan to -48.0457 million yuan.
In June 2023, Jin Tongling was investigated by the China Securities Regulatory Commission. In January this year, the administrative penalty from the Jiangsu Securities Regulatory Bureau was officially implemented. After investigation, from 2017 to 2022, Jin Tongling inflated or reduced profits for 6 consecutive years, accounting for 103.06%, 133.10%, 31.35%, 101.55%, 5774.38%, and 11.83% of the company's total disclosed profits (absolute value) in each year, resulting in false records in the company's annual reports for the corresponding years.
In the end, Jin Tongling was ordered to make corrections, given a warning, and fined 1.5 million yuan; A number of "directors, supervisors and senior executives" at that time were also given warnings and fines.
In retrospect, from 2012 to 2016, Jin Tongling's auditor was Zhonghui Certified Public Accountants. In 2017, when the financial fraud began, Dahua Law Firm became the annual audit agency of Jin Tongling, and issued a standard unqualified audit conclusion for Jin Tongling for many years.
In addition, Huaxi Securities, which undertook Jin Tongling's 2019 non-public issuance of shares sponsorship, was also fined by the Jiangsu Securities Regulatory Bureau.
On the evening of May 5, Huaxi Securities announced that the company was suspended from sponsorship business for 6 months by the Jiangsu Securities Regulatory Bureau, and the suspension period is from April 28 to October 27, 2024. If two sponsor representatives are found to be unsuitable persons, they shall not hold positions related to the sponsorship business of securities issuance and listing of securities companies or actually perform the above duties for two years from the date of the decision on regulatory measures.
Listed companies "queue" to terminate the contract
According to public information, Dahua is the first national brand of accounting firm established in China. From 2011 to 2021, UOB ranked among the top 10 in the industry in the comprehensive ranking of the China Injection Association for 11 consecutive years, and ranked seventh in the 2021 ranking.
According to the information on the official website, Dahua Certified Public Accountants has more than 1,500 certified public accountants, more than 500 customers of listed companies, and more than 10,000 perennial audit customers.
However, in recent years, UOB has frequently imposed regulatory penalties. In March 2023, Dahua was fined a total of 3.6792 million yuan and two certified public accountants were warned and fined 50,000 yuan for false records in Zhangzidao's 2016 annual audit report and failure to exercise due diligence during the audit. According to the information of the China Note Association, Dahua has also been punished by the Beijing Securities Regulatory Bureau, the Guangdong Securities Regulatory Bureau, the Shenzhen Securities Regulatory Bureau and other places in the past three years.
Recently, a "letter to customers" issued by Dahua has been circulating on the Internet. According to the letter, UOB received the Administrative Penalty Decision issued by the Jiangsu Securities Regulatory Bureau on May 10, and was suspended from engaging in securities service business for 6 months (from May 10, 2024 to November 9, 2024), and resumed engaging in securities service business on November 10, 2024.
In the letter to the client, Dahua said that the administrative penalty will not affect the audit business of the 2024 annual report, and there is no legal obstacle to the appointment of the so-called 2024 annual report auditor of Dahua.
However, since the evening of May 12, a number of listed companies have successively disclosed and announced that they will cancel the reappointment of Dahua as the auditor in 2024 and cancel the relevant proposals in the 2023 annual general meeting of shareholders.
Among them, most of the listed companies said that the reason for the cancellation of the cooperation was that UOB "recent relevant matters are subject to further verification by the company", and the relevant proposals were cancelled based on the principle of prudence after consultation between the two parties. However, Booz Software, Haixin Food and other companies made it clear that they decided to cancel the re-employment due to the administrative punishment received by Dahua.
Editor: Joey
Review: Chen Mo