China Huarong Asset Management, Deloitte fined after probe reveals serious deficiencies
Published: Mar 18, 2023 12:02 AM
Photo: VCG

Photo: VCG

China's Ministry of Finance (MOF) announced on Friday a financial punishment involving a fine of 800,000 yuan ($116,227) for China Huarong Asset Management and a fine of nearly 212 million yuan for its auditor Deloitte along with other legal punishments, after an investigation uncovered illegal activities including audit deficiencies.

The MOF's investigation started in 2021. A special inspection team was established and an on-site inspection of Huarong and Deloitte was carried out. An extensive investigation was conducted and evidence was collected, as part of the government's efforts to strengthen financial and accounting supervision to build a fair, law-based market economy.

From February 24 to March 6, the MOF organized a hearing against Deloitte according to the law, and fully listened to the statement and defense.

The relevant facts were debated and cross-examined to ensure that the facts were clear, the evidence was solid, and the procedure was legal.

After the investigation, it was found that from 2014 to 2019, Huarong had problems such as failure of risk control and serious distortion of accounting information.

Huarong and seven of its subsidies were fined a total of 800,000 yuan and 19 responsible personnel at the company were also fined.

Deloitte, Huarong's auditor, was also found guilty in the case, including failure to pay sufficient attention to the various arms of Huarong's business.

Other violations by the auditor included failure to maintain professional skepticism, and failure to effectively implement necessary audit procedures or obtain sufficient and appropriate audit evidence, as well as serious auditing deficiencies. Some personnel at the company were also found liable and punishments were announced.

Given the illegal practices happened even after a warning was given, the business operations of Deloitte's Beijing Office have been suspended for three months, and the Beijing branch's illegal income was confiscated. The company was also fined 211.904 million yuan.

For the penalty decision, the corresponding companies and individuals have the right to initiate administrative reconsideration or administrative litigation, according to the MOF.

During the period of administrative reconsideration or administrative litigation, the execution of the penalty decision will not be suspended.

The MOF pledged to further strengthen financial and accounting supervision, strictly enforce financial discipline and severely crack down on accounting and audit violations, while protecting the legitimate rights and interests of enterprises and intermediary agencies in accordance with the law.

Global Times