Posted by on March 17, 2023 9:46 pm
Categories: Breaking News News Zero Hedge

Deloitte’s Beijing Office Suspended By China Over ‘Deficiencies’ In Huarong Audit

Deloitte’s Beijing Office Suspended By China Over ‘Deficiencies’ In Huarong Audit

The Chinese government suspended operations at the western-linked auditor Deloitte Touche Tohmatsu Ltd.’s Beijing office for three months after finding “deficiencies” in its auditing work for China Huarong Asset Management. 

According to Bloomberg, the Chinese finance ministry carried out a thorough assessment of Deloitte’s auditing of bad debt manager Huarong. This evaluation included on-site inspections, personnel interviews, a complete review of documentation, and even a hearing.

The ministry found the big four accounting firm had “serious audit deficiencies” in its work with Huarong between 2014 and 2019. 

When Huarong delayed the release of its annual report in 2021, it triggered a credit crisis that rippled through Asian markets. The firm eventually revealed a staggering loss for the previous year, necessitating a state-backed bailout from Beijing.

Deloitte’s Beijing branch was fined 212 million yuan ($30.8 million) for not properly reviewing Huarong’s assets, overlooking compliance approvals on significant investments, and failing to offer a sense of skepticism during the auditing work on the bad debt manager. The auditors missed several risk control failures and distortions in Huarong’s books.

The suspension and fine of Deloitte’s Beijing office come one month after Chinese authorities reportedly instructed state-owned companies to phase out contracts with western-linked auditors, such as Deloitte, KPMG, EY, and PwC. 

Tyler Durden
Fri, 03/17/2023 – 21:10

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