China fines Deloitte $31 mln for auditing negligence (updated)

China CITIC Financial Asset Management

17/03/2023 10:08

(Adds statement from Huarong)
       BEIJING, March 17 (Reuters) - 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 Co Ltd  2799.HK , the finance ministry said on
its website on Friday.
    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 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)

 (Reporting by Ella Cao, Meg Shen and Ziyi Tang; Editing by Toby
Chopra and Sonali Paul)
 ((meg.shen@thomsonreuters.com; 852-39525805;))