Sat, 09 Dec 2023

China fines Deloitte $31 mln for auditing negligence

Robert Besser
20 Mar 2023, 15:37 GMT+10

BEIJING, China: Following the inability of China Huarong Asset Management Co Ltd to release financial reporting obligations in 2020, China has now fined auditing firm Deloitte $30.8 million, claiming it failed to properly evaluate the quality of the assets of Huarong.

The announcement was made last week on the finance ministry's website.

Further, Beijing has fined China Huarong and its investment arms due to what it described as internal governance lapses, risk control failures and severe inaccuracies in its accounting information from 2014 to 2019, the ministry's statement added.

Following the imposition of the fines, Huarong officials said, it would strengthen its internal controls and its risk management systems.

The finance ministry has blamed Deloitte for failing to determine the true situation of the company's assets in its audits and ignoring the correct approval compliance that normally directs Huarong's major investment matters.

China also charged that Deloitte did not issue proper audit opinions after identifying abnormal transactions by Huarong, and it did not seek appropriate evidence about financial concerns during its audits, it added.

Huarong, a state-owned distressed-debt manager, did not release its 2020 earnings on time. Only afterwards did it report a significant loss.

"We regret that, in this matter, the MOF considers that certain aspects of our work fell below the required auditing standards," Deloitte said in a statement.

Meanwhile, Huarong has said the company and its seven subsidiaries had each received a $14,500 fine.

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