The details of Dahua's punishment have landed! was fined 44.02 million yuan, and three certified public accountants were given warnings

Interface News Reporter | Chen Jing

Following the statement issued by Dahua Certified Public Accountants (hereinafter referred to as "Dahua"), the details of the punishment imposed by the Jiangsu Securities Regulatory Bureau on Dahua have been implemented.

On the evening of May 13, the Jiangsu Securities Regulatory Bureau announced an administrative penalty decision, because of the failure to be diligent and conscientious in the audit of Jin Lingtong's annual financial statements from 2017 to 2022, and the audit report issued by it contained false records, Dahua was ordered to make corrections, confiscate business income of 6.8868 million yuan, impose a fine of 34.434 million yuan, and suspend the securities service business for 6 months.

Fan Rong was given a warning and fined 1.5 million yuan; Yan Lisheng was given a warning and fined 800,000 yuan; Hu Zhigang was given a warning and fined 400,000 yuan. The amount of the fine imposed on Dahua is 5 times the business income, reaching "no one is fined five", and the total amount of fines and confiscations is 44.0208 million yuan.

On the same day, Dahua issued a statement saying that on May 10, the Jiangsu Securities Regulatory Bureau issued an administrative penalty decision to Dahua Certified Public Accountants.

It is understood that more than 10 listed companies have cancelled their cooperation with UOB. In addition, in terms of IPO audit business, 34 of the 47 projects reviewed by Dahua were suspended, and 12 were terminated due to the withdrawal of materials.

There are a number of illegal facts

According to the investigation of the Jiangsu Securities Regulatory Bureau, Dahua has the following illegal facts:

When Dahua failed to exercise due diligence in the audit of Jin Tongling's annual financial statements from 2017 to 2022, the audit report issued by it contained false records.

The annual audit reports issued by Dahua from 2017 to 2021 all regarded the revenue recognition of Jintongling's construction contract as a key audit matter. There were significant deficiencies in the risk assessment procedures and internal control testing procedures related to the construction contract, among which, during the audit of the 2017 annual report, the project team found that there was no reliable basis for the operating income, operating costs and completion progress of the Jintongling construction contract project, and the project manager had significant differences with the company on the method of confirming the actual input cost of the construction contract; Gross misjudgment of the revenue recognition method for construction contracts; The audit working papers did not contain any understanding of the internal control activities related to the construction contract business, and there was no control test of the critical control points of the construction contract business.

From 2017 to 2022, there were significant deficiencies in the substantive procedures related to construction contract revenue, firstly, there were obvious differences between the on-site monitoring of some projects and the progress of the company's book recognition, and UOB did not reassess the company's possible financial fraud risks and failed to take appropriate audit response measures; second, the on-site monitoring procedures of the construction contract business were not effectively implemented; Third, it does not consider whether the changes in inventories between the monitoring date and the balance sheet date have been properly recorded.

In 2018, there were major deficiencies in the substantive procedures related to the income from construction contracts, firstly, the failure to reassess the integrity of the management and the risk of financial fraud in light of the material anomalies found in the audit of the previous year, and the failure to implement further procedures such as on-site visits to deal with the risk of fraud; second, there is no professional suspicion of obviously abnormal replies; Third, the on-site monitoring procedures for the construction contract business were not effectively implemented.

There were significant deficiencies in the substantive procedures relating to construction contract income in 2019.

In 2020, there were significant deficiencies in the substantive procedures related to the income from the construction contract, and the accountants did not pay attention to the anomalies of the inconsistency between the completion progress and the approved completion progress learned from the on-site interviews, and the anomalies of the mismatch between the equipment input confirmed by the construction contract business and the installation schedule.

There were material deficiencies in the substantive procedures relating to construction contract income in 2021 and material deficiencies in 2022 relating to construction contract revenue.

In terms of the determination of the liability of the parties, Fan Rong, as the project partner and signing certified public accountant of the audit report from 2017 to 2021, Yan Lisheng as the signing certified public accountant of the audit report from 2018 to 2022, Hu Zhigang as the signing certified public accountant of the 2017 audit report, and the project partner and signing certified public accountant of the 2022 audit report, are the directly responsible supervisors. Among them, Hu Zhigang, as the signing certified public accountant of Jin Tongling's 2017 audit report, has passed the statute of limitations for administrative punishment.

On May 13, Haixin Food, Zhongyuan Internal Distribution, Power Diamond, Boss Software, Taiji Co., Ltd., Jiahe Mecan, Kuncai Technology, Far East Transmission and other companies announced that they would cancel part of the proposals related to the appointment of accounting firms at the 2023 annual general meeting of shareholders.

Ni Xiaoran, a professor at the School of Economics of Xiamen University, said in an interview with Jiemian News that accounting firms play the role of "gatekeepers" in the capital market, and if they ignore the quality management of their own business, audit institutions cannot play their due role, and the financial reports of listed companies may be distorted. The regulatory authorities have imposed severe penalties on audit institutions that fail to perform their duties, which is a concrete embodiment of the full implementation of the requirements of "full regulatory coverage" and "long teeth with thorns", and also demonstrates the determination and confidence to promote the construction of a financial power by improving the capital market system.

Earnestly improve the quality of the practice of "gatekeepers" in the capital market

Under the comprehensive registration system, with the prevention of securities fraud and counterfeiting and the protection of investors' rights and interests as the core, securities intermediaries must not only perform their basic duties, but also meet the necessary conditions to promote the sustainable development of the capital market.

Tian Xuan, deputy dean of Tsinghua University's PBC School of Finance, said that it is necessary to effectively increase the punishment and deterrence of illegal supervision of the capital market. Although the new Securities Law has significantly increased the upper limit of penalties for financial fraud. However, objectively speaking, compared with the ultra-high returns brought by financial fraud, fraudulent issuance, insider trading and market manipulation, there is still room for further strengthening of the current administrative penalties.

Tian Xuan gave an example, for example, the amount of punishment can be determined based on the income from violations. In the future, it is necessary to further promote the resonance of the Criminal Law and the Securities Law, crack down on financial fraud, fraudulent issuance, insider trading, market manipulation and other violations of laws and regulations, improve the class action system, and effectively protect the rights and interests of small and medium-sized investors.

At the same time, regulation is becoming increasingly stringent. On January 19, the China Securities Regulatory Commission said at a regular press conference: "It will 'double check one case' on intermediaries engaged in sponsorship and underwriting, auditing and accounting, legal, rating and other securities services, and warn the 'gatekeepers' of the capital market to improve the quality of practice." ”

Regarding how accounting firms should ensure the quality of audits, Ni Xiaoran believes that first of all, it is necessary to take system construction as the core and enhance the sense of responsibility. In the context of the current intensification of supervision and the punishment of some institutions with insufficient awareness of responsibility, audit institutions should quickly integrate these new changes into the rules and regulations of the institutions to ensure that the regulatory requirements of "full coverage" are effectively implemented.

"In order to improve the quality of the personnel team of audit institutions, the construction of talent team should be strengthened. Actively attract and cultivate audit talents with good professional ability, overall concept and ethics to solve the problem of uneven personnel of audit institutions. In addition, there is a need to further strengthen the supervision, guidance and education of audit institutions. Organically combine the construction of the rule of law with the construction of morality, and improve their sense of responsibility and compliance awareness through a variety of means. Ni Xiaoran added.