Trainee reporter Wen Yan
On the evening of May 15, 7 A-share companies successively announced that they would cancel the proposal on renewing the appointment of accounting firms in the 2023 annual general meeting of shareholders.
The reporter noted that the accounting firms of the above seven A-share companies that did not renew their employment were all Dahua Certified Public Accountants (Special General Partnership) (hereinafter referred to as "Dahua Firm").
Recently, Dahua was suspended from its securities service business for 6 months and fined by the Jiangsu Securities Regulatory Bureau for being involved in a financial fraud case of a listed company, and then was disciplined by the Shenzhen Stock Exchange.
Seven companies did not renew their hires
Among the above seven A-share companies, Yili Co., Ltd. held an interim meeting of the board of directors on May 15 and deliberated and passed the "Proposal of the Company on Canceling the Renewal of the Accounting Firm and Canceling Part of the Proposal of the 2023 Annual General Meeting of Shareholders".
Yili shares announced that in view of the recent relevant matters of the proposed accounting firm to be further verified by the company, based on the principle of prudence, it is planned to cancel the reappointment of Dahua as the company's external auditor in 2024.
A similar situation also occurred among the other A-share companies mentioned above, that is, they previously decided to re-appoint Dahua as the external auditor for 2024, but decided to cancel the re-appointment in the announcement on the evening of May 15.
Some listed companies have clarified the reasons for not renewing their employment. Jiugang Hongxing announced that the company cancelled the reappointment of Dahua as an external auditor in 2024 in view of the fact that Dahua was recently punished by the Jiangsu Securities Regulatory Bureau.
In the previous announcement of the planned re-employment, some listed companies mentioned the advantages of UOB.
Yangzhou Jinquan announced on April 20 that the company plans to re-appoint Dahua as the 2024 annual financial report and internal control auditor, "in view of its prudent and serious work attitude, rigorous and realistic work style, and at the same time to maintain the continuity and stability of the company's audit work".
Some of the above-mentioned companies mentioned in the announcement that the company's decision to cancel the renewal of employment had communicated with Dahua in advance, and they had no objection to this.
Dahua has been fined several times
According to the information on the official website, Dahua was founded in 1985 and has more than 1,500 certified public accountants, more than 500 listed company clients, and more than 10,000 perennial audit clients.
However, UOB has been penalized by regulators several times in recent years. This time, a number of listed companies did not renew their appointment as auditors in 2024, which involved relevant penalties from the Jiangsu Securities Regulatory Bureau.
On May 13, the official website of the Jiangsu Securities Regulatory Bureau disclosed the administrative penalty decision, and the parties were Dahua and relevant staff.
The Jiangsu Securities Regulatory Bureau believes that when Dahua audited Jin Tongling's annual financial statements from 2017 to 2022, there were major deficiencies in the risk assessment and internal control testing procedures, failure to take appropriate audit measures to deal with fraud risks, material deficiencies in substantive procedures, violations of relevant practice standards, failure to perform due diligence obligations, and false records in the audit reports issued.
Based on the facts, nature, circumstances and degree of social harm of the parties' illegal acts, combined with the special circumstances under which their illegal acts crossed the application of the old and new Securities Law, the Jiangsu Securities Regulatory Bureau decided to order Dahua 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.
On the afternoon of May 13, Dahua issued a statement saying that it sincerely accepted the penalty decision of the regulatory authorities, consciously accepted the supervision of various regulatory agencies, corporate customers and all parties in society, and carried out comprehensive rectification as required, and organized deep reflection throughout the firm.
On May 14, the Shenzhen Stock Exchange imposed a disciplinary decision on UOB and related personnel. Among them, the Shenzhen Stock Exchange decided to impose a public reprimand on UOB and related personnel, and imposed a penalty on UOB for not accepting documents related to its securities business and securities service business for six months.
The wave of cancellations is likely to continue
According to the reporter's incomplete statistics, as of the evening of May 15, 17 A-share companies have cancelled the renewal of Dahua as the external auditor for 2024.
This is only two days after Dahua was fined by the Jiangsu Securities Regulatory Bureau.
As of May 14, more than 400 A-share companies have appointed UOB as the auditor of the 2023 annual report.
At the same time, equity financing projects that are queuing for review may be affected. As of May 14, UOB had a total of 50 projects in the queue for review, of which 38 were IPO projects, 10 were refinancing projects, and 2 were M&A and restructuring projects.
In the eyes of industry insiders, it is not surprising that listed companies will not renew the intermediaries that have been punished by the regulator for many times based on their own business development needs and risk avoidance, not to mention that the securities service business of UOB has been suspended by the regulatory authorities for a period of time, and many companies that plan to renew their appointment as auditors in 2024 cannot afford to wait.
On April 30, the Shanghai and Shenzhen North Stock Exchange revised the "Stock Issuance and Listing Review Rules (Revised in April 2024)", which proposes that if "the issuer's sponsor and securities service institution have not been lifted by the China Securities Regulatory Commission in accordance with the law to restrict business activities, order to suspend business for rectification, designate other institutions to custody or take over", the issuer, sponsor and securities service institution shall promptly inform the exchange, and the exchange will suspend the issuance and listing review and notify the issuer and its sponsor.
In this regard, the IPO company can choose whether to change the intermediary.
According to the Rules for the Review of Stock Issuance and Listing (Revised in April 2024), if an issuer needs to change a sponsor or securities service institution in accordance with the regulations, the replaced sponsor or securities service provider shall complete due diligence, re-issue relevant documents, and review the documents issued by the original sponsor or securities service provider, issue review opinions and explain the differences.
Editor: Captain
Review: Muyu