Deloitte China unit hit with US$31 million fine for auditing failures at troubled bad debt manager Huarong, ministry says
- Deloitte’s Beijing branch has been banned from conducting business for three months, and its ‘illegal income’ has been ‘confiscated’
- Penalties based on on-site inspections at both Deloitte and Huarong, ministry says
Deloitte Hua Yong, the “Big Four” accounting firm’s China unit, has been fined 212 million yuan (US$31 million) for failures in audit work conducted at bad loan manager China Huarong Asset Management, as Beijing strengthens financial regulation.
The Deloitte unit failed to detect the true conditions of some of Huarong’s underlying assets, or to fully assess its businesses and operations, from 2014 to 2019, China’s ministry of finance said in a statement on its website on Friday. Deloitte’s Beijing branch has been banned from conducting business for three months, and its “illegal income” has been “confiscated”.
“During the period when it offered auditing services [to Huarong], [Deloitte Hua Yong] did not maintain [a] professional sceptical attitude, did not effectively conduct essential auditing procedures, did not obtain sufficient and adequate auditing evidence and had severe auditing flaws,” the ministry said in its statement.
The ministry finalised the penalties based on on-site inspections at both Deloitte and Huarong from February 24 to March 6 this year, the statement said. The accounting firm ignored compliance checks on important investments, failed to offer auditing suggestions on abnormal transactions and failed to objectively assess the condition of Huarong’s assets, the ministry added.
The licences of two certified accountants at Deloitte were also suspended, with a few others ordered to pause accounting services for either a year or six months.
