In just 45 days, 23 accounting firms have been fined!
The annual report season is about to begin, and the Chinese reporter of the brokerage company combed and found that since the beginning of this year, the supervision has issued at least 46 fines for the practice of accounting firms, involving 23 accounting firms and 98 practitioners.
Among the fined accounting firms, Lixin Accounting Firm, Dahua Accounting Firm and other large accounting firms are listed. From the perspective of violations, the failure to be diligent and conscientious in the audit of annual reports has become the focus of regulatory attention.
Twenty-three accounting firms have received regulatory letters
On January 19, the China Securities Regulatory Commission (CSRC) said at a regular press conference that in the recent period, the CSRC has focused on solid progress in many aspects of inspection and law enforcement. Among them, the China Securities Regulatory Commission said: "The intermediary institutions engaged in sponsorship and underwriting, audit and accounting, law, rating and other services are 'double checked' in one case, and the 'gatekeepers' of the capital market are warned to improve the quality of practice." ”
According to incomplete statistics from Chinese reporters from securities firms, since the beginning of this year, the securities regulatory system and the stock exchange have issued administrative supervision and punishment measures to 23 accounting firms and 98 accounting firm employees. The accounting firms involved are all special general partnerships, and for the convenience of expression, the following are abbreviated in the form of institutions and accounting firms.
From the perspective of punishment, the characteristics of "double punishment" in supervision are obvious. For the projects named by the above-mentioned 23 accounting firms, the corresponding signatory certified public accountants have been issued corresponding regulatory measures. Typical cases such as Baker Tilly International Accounting Firm failed the on-site inspection, and the institution itself and 10 relevant responsible personnel were issued warning letters.
The supervision letter mentioned that an on-site inspection of Baker Tilly International Accounting Firm was conducted, and it was found that there were problems with the firm's and related personnel in terms of quality management system, independence, and project practice quality. For example, individual employees violated the internal regulations of the listed company** audited by the exchange, and there were violations such as the risk assessment procedures in place for the audit items of the annual report.
Zhonghui Accounting was fined in a similar situation. The regulator inspected the internal governance and integrated management of Zhonghui Accounting Firm, and found that there were contingent charges such as agreed issuance rewards for some IPO projects, supplementary audit fees after successful issuance, etc. In the end, Zhonghui Accounting Firm and 10 relevant responsible personnel were issued warning letters.
In terms of the fines received by the institution, the accounting firms with the highest number of fines are Dahua Accounting Firm, Zhonghui Accounting Firm, and Zhongxing Cai Guanghua Accounting Firm. The former was fined 4 times, and the latter 2 were both fined 3 times.
Daxin Accounting Firm, Lixin Accounting Firm, Tianheng Accounting Firm, Baker Tilly International Accounting Firm, ShineWing Accounting Firm, Yongtuo Accounting Firm, Zhongtianyun Accounting Firm, and Zhongxinghua Accounting Firm were all fined twice. 12 accounting firms, including Beijing Zhongtian Huamao Accounting Firm and Hexin Accounting Firm, were fined once.
Based on the ranking of the audit business of the 2022 annual report, Wind shows that 17 of the 23 accounting firms that have been fined are in the top 20. Among them, Lixin Accounting Firm, Dahua Accounting Firm, Zhongxing Hua Accounting Firm, Zhongxing Cai Guanghua and Daxin Accounting Firm are the top 10 accounting firms in terms of business volume.
More than eighty percent of the fines refer to the audit violations of the annual report
Judging from the reasons for the fines, more than eighty percent of the fines point to the audit of the annual report. A small number of accounting firms were fined for failing to rotate in accordance with regulations in special inspections for independence, or problems in the practice of IPO projects.
The irregularities in the audit of the annual report mainly include defects in the audit procedures of accounts receivable, defects in the procedures of individual correspondence, inadequate implementation of risk assessment procedures, lack of basis for some audit adjustments, and false records in the documents issued.
Brokerage China reporters noticed that most of the fines of accounting firms were found to be in violation of regulations in the audit inspection of listed companies' annual reports, and a few were found in special inspections of accounting firms. In terms of the quality of practice, most of the accounting firms selected for special inspection had violations in several annual report audit projects. For example, Baker Tilly International Accounting has four annual report audit projects.
For violations in the audit of annual reports, the regulator will issue a warning letter, order corrections or require a conversation, impose a fine, and suspend business development.
The heaviest punishment such as Zhongtian Huamao Accounting Office, was "fined five for nothing", with a total of 877 fines360,000 yuan, and suspended from engaging in ** service business for 6 months. Qiu Wenxing and three other signatory certified public accountants were warned and fined a total of 3 million yuan.
According to the administrative penalty decision, Zhongtian Huamao Accounting Firm is the auditor of the 2020 annual financial statements of Oriental Netpower, and received an audit fee of 1.55 million yuan (tax included). After investigation, the regulator found that there were false records in the documents issued by Zhongtian Huamao Accounting, and an unqualified audit report with significant uncertainties in continuing operations was issued on the 2020 annual financial statements of Oriental Netpower.
In addition, Zhongtian Huamao Accounting Firm failed to exercise due diligence in the audit of the 2020 annual financial statements of Oriental Netpower, and there were deficiencies in audit independence, deficiencies in the audit of fixed assets, and deficiencies in the audit of the matters involved in the qualified opinion of the previous year.
at the risk of being punished", "It's a big deal, my small house is closed", ......According to the details disclosed in the administrative penalty letter, Zhongtian Huamao Accounting Firm agreed in the relevant agreement that the contingent fee was to issue an unqualified audit report as the payment condition.
Another accounting firm that was fined was Zhongxi Accounting Firm. As the auditor of Beijing Culture's 2018 financial statements, Zhongxi Accounting was not diligent and conscientious, and was ordered to make corrections and fined 264150,000 yuan. The two signatory CPAs were each fined $100,000.
On September 15, 2023, in order to guide accounting firms entering the ** audit market to practice diligently and responsibly, the China Securities Regulatory Commission (CSRC) issued the "Compliance Manual for Accounting Firms Engaged in ** Service Business (2023)". As mentioned in the preamble of the manual, the full implementation of the first-class issuance registration system is a major reform of the capital market, which puts forward new and higher requirements for the verification and gatekeeping responsibilities of intermediaries such as accounting firms.
At the same time, the China Securities Regulatory Commission has repeatedly emphasized that it is necessary to comprehensively strengthen institutional supervision, behavior supervision, functional supervision, penetrating supervision, and continuous supervision, and effectively implement the "long teeth and thorns" of supervision. As a result, it is expected that the supervision of accounting firms will continue to be tightened.
Editor-in-charge: Luo Xiaoxia.
Proofreading: Wang Wei.