Behind Shenzhen Tangtang's "No One Penalty Six": ST's unspoken audit rules reveal the tip of the iceberg
On January 7, the "CSRC released" WeChat public account announced that "the heads of relevant departments of the China Securities Regulatory Commission answer reporters' questions".
The China Securities Regulatory Commission said that recently, I will perform the hearing procedure for the case of violation of laws and regulations in the audit business of Shenzhen Tangtang Accounting Firm (hereinafter referred to as “Tangtangsuo”) in accordance with the law, and will make a penalty decision according to the law after listening to the parties’ statements and defenses.
In this case, the audit object involved in the case of Tangtang is *ST Xinyi, a listed company. Tangtang signed an agreement with *ST Xinyi, knowing that the audit business of *ST Xinyi annual report had been "rejected" by other accounting firms, promising to undertake Do not issue "incapable of expressing opinion" or "negative opinion" in the audit report, and require that *ST Xinyi should be compensated if it is punished by the regulatory authority.
Its audit independence is seriously lacking, the audit procedures have many defects, the audit report contains false records and major omissions, and it lacks due professional ethics and bottom line.
I will take the administrative punishment of "one penalty for six" against Tangtang, and the relevant subjects will be transferred to the public security organs for suspected crimes.
In addition to intermediaries, the China Securities Regulatory Commission also stated that *ST Xinyi has been subject to administrative penalties by the Commission several times in recent years. Recently, the Commission has carried out the hearing procedures for its 2018 and 2019 annual reports of serious financial fraud, and will also make a penalty decision according to law. .
On February 19 last year, the China Securities Regulatory Commission published an article on the WeChat public platform saying that the China Securities Regulatory Commission was concerned about the fact that Shenzhen Tangtang Accounting Firm has successively undertaken the annual report auditing companies of listed companies, and found that there are many problems in the practice process.
The China Securities Regulatory Commission has filed an investigation into *ST Xinyi and Shenzhen Tangtang Accounting Firm for suspected violations of laws and regulations.
When the punishment was officially implemented, Tangtangsuo questioned the result of the punishment.
However, some people in the industry bluntly said that the punishment of "no one penalty six" for Tangtang is within the scope of the CSRC's authority and is justified.
The punishment of "no one penalty six" for dignified has also revealed the tip of the iceberg of the unspoken rules of ST company (or *ST company) audit.
Can audit opinions also be purchased?
Can the fined be compensated by the listed company?
Following the exposure of the four major scandals such as Deloitte, in February last year, the previously unknown Shenzhen Tangtang Accounting Firm suddenly became popular.
It is understood that Shenzhen Tangtang Certified Public Accountants is the first non-securities qualified accounting firm to undertake auditing of annual reports of listed companies after the implementation of the new securities law. It has undertaken audits of many ST and *ST listed companies.
In its 2021 New Year's speech, Shenzhen Tangtang Certified Public Accountants claimed that Shenzhen Tangtang is the first small and medium-sized accounting firm in China to undertake the auditing business of listed companies, and also the first small and medium-sized accounting firm in China to issue audit reports for A-share listed companies.
And in December 2020, it was among the top 100 accounting firms in Shenzhen.
In fact, the financial report audits of ST and *ST listed companies have attracted much attention, and these star-wearing companies may have the risk of suspending or even terminating their listing.
After Shenzhen Tangtang Certified Public Accountants took over several listed companies with stars and hats, doubts arose in the market. Are there any listed companies buying audit opinions from audit institutions?
According to the disclosure of the China Securities Regulatory Commission, Tangtang signed an agreement with *ST Xinyi, knowing that the audit business of *ST Xinyi annual report had been "rejected" by other accounting firms, and promised not to issue "unable to express opinions" in the audit report. Or "negative opinion", and require that *ST Xinyi should be compensated in the event of being punished by the regulatory authorities.
In fact, the audit business of ST listed companies has always been a hot potato. Similar to the big four or well-known domestic accounting institutions, they are often reluctant to undertake the audit of ST listed companies.
Some companies with stars and hats, especially companies that have not passed the audit before, may be delisted if they are issued a negative opinion or cannot express their opinion. Therefore, undertaking the audit business of these companies is a big test for independence. .
In the *ST Xinyi audit, two accountants have withdrawn
From the perspective of *ST Xinyi's business, on March 27, 2020, *ST Xinyi issued an announcement to re-appoint Shenzhen Tangtang Accounting Firm. The announcement disclosed that the former accounting firm was Sichuan Huaxin (Group) Accounting Firm (special General Partnership) (referred to as Huaxin).
It is worth noting that in the process of undertaking the business of *ST Xinyi, Wu Yutang, the director and chief partner of Shenzhen Tangtang Accounting Firm, had disagreements with several other certified public accountants in the firm.
"I think it can be done. They say that this risk is high. In fact, we only undertake some ST tasks after fully considering the risks. Since we are doing this business, whether it is a healthy or unhealthy listed company, it must be independent and objective. , to practice impartially."
On July 15, 2020, *ST Xinyi once again issued an announcement on the change of certified public accountants, stating that the original two accountants of Tangtang Certified Public Accountants will no longer participate in this audit work, and the existing certified public accountants who are willing to participate in this audit work will join the firm The procedure has been completed and the relevant information has changed.
What, then, was the reason for the signing CPA's withdrawal at the time seems self-evident now.
Those CPAs who participated in the *ST Xinyi audit and signed off will now not only be fined, but some will be banned from the market for 10 years.
Shenzhen Tangtang Accounting Firm starts from the bottom
According to the official website, Tangtang Institute was initiated and established in December 2004 and was established with the approval of the Shenzhen Municipal Finance Committee. It independently undertakes professional services for certified public accountants such as auditing, capital verification, asset evaluation, accounting services, tax services, internal control services and management consulting. mechanism.
When the new "Securities Law" was implemented in March 2020, the administrative license for accounting firms to engage in securities service business was adjusted to post-event filing management. Tangtang was the first in the country to undertake the auditing of the annual report of the listed company Xinyi Shares and issue an audit report.
After successfully undertaking the audit of the 2019 annual report of Xinyi Co., Ltd., at the end of 2020, Tangtang has successively decided to audit the annual reports of 5 listed companies including Xinyi Co., Ltd., Steyr (*ST Stey), and Jinzhou Cihang (*ST Jinzhou). .
After undertaking the annual report audit work of several ST and *ST listed companies, Tangtangsuo quickly attracted market attention.
On February 19, 2021, the China Securities Regulatory Commission stated on the WeChat public platform that the China Securities Regulatory Commission recently paid attention to the fact that Shenzhen Tangtang has undertaken the audit business of the 2019 annual report of *ST Xinyi in 2020, and has successively undertaken the audit business of the annual reports of a number of listed companies.
In the second half of 2020, the CSRC conducted an on-site inspection of the *ST Xinyi audit business performed by Shenzhen Tangtang, and found that there were many problems in its practice.
According to the inspection results, the China Securities Regulatory Commission has filed an investigation into *ST Xinyi and Shenzhen Tangtang for suspected violations of laws and regulations.
This time, Shenzhen Tangtang was investigated by the China Securities Regulatory Commission, and the market generally believes that the regulatory trends revealed in it are worthy of attention.
It is worth noting that last year, the listed company ST Hemei once caused a regulatory turmoil because of its plan to re-employ Shenzhen Tangtangsuo. Shenzhen Tangtangsuo eventually "lost" this large order of 2 million yuan.
On the evening of January 19, 2021, the listed company ST Hemei announced that it plans to re-employ Shenzhen Tangtang Institute as the 2019 audit institution, with an audit remuneration of 2 million yuan.
The management department of the small and medium-sized board company sent a letter of concern to this, and questioned its re-employment of Shenzhen Tangtang through 8 major issues, including Shenzhen Tangtang's practice ability, internal control audit communication, and the process of selecting Tangtang.
Subsequently, ST Hemei did not give a specific reply to the letter of concern of the Shenzhen Stock Exchange, but changed the accounting firm to Zhonghua Accounting Firm again.
Regarding the reasons for the change, ST Hemei stated in the announcement that Tangtang had a further in-depth understanding of the company's business and the matters to be audited. The procedures for the company's related audit matters were relatively complicated, and the time for various audit projects undertaken by Tangtang was relatively tight. Therefore, it is difficult to invest more manpower to promote the company's annual review project during the annual review period.
Don't fantasize about being punished and change skins
In fact, although the new "Securities Law" cancels the administrative licensing requirements for accounting firms to engage in securities service business, small and medium-sized firms should have a deep understanding of the high risks of securities business and evaluate their own practice ability before participating.
On February 19, 2021, the spokesperson of the China Securities Regulatory Commission stated that the securities service business, especially the audit business of listed companies, has the characteristics of strong professionalism, high practice risk and high illegal cost, and requires accounting firms with high professional ability and risk prevention ability. All that can be done.
Before entering into practice in the capital market, an accounting firm should have a comprehensive and in-depth understanding of the capital market law, regulation, market entities and other aspects, fully evaluate its own professional competence and risk prevention capabilities, and prudently undertake securities service business.
On January 7, 2022, the China Securities Regulatory Commission re-emphasized that accounting firms have been given fair opportunities to participate in the capital market, but they must also assume corresponding responsibilities. No matter how big or small, they are all equal in abiding by the law and equally in terms of regulatory requirements. .
The China Securities Regulatory Commission has previously emphasized that the new "Securities Law" adjusts the administrative license for accounting firms to engage in securities service business to post-filing management, which is a major measure to implement the reform of "decentralization, regulation and service" and enhance the vitality of the securities audit market.
On the one hand, it is conducive to giving full play to the decisive role of the market mechanism, and promoting the formation of a benign securities audit market ecology with "in and out" and "survival of the fittest"; Consolidate the "gatekeeper" responsibilities of accounting firms, urge the improvement of audit quality, and effectively ensure the quality of financial information disclosure in the capital market.
The China Securities Regulatory Commission also pointed out that in the next step, the China Securities Regulatory Commission will fully implement the decisions and arrangements of the CPC Central Committee and the State Council on cracking down on illegal securities and futures activities in accordance with the law. The supervision of the securities audit market shall effectively maintain the market order and protect the legitimate rights and interests of investors.
From the current point of view, the idea that even if you are punished, you can change your skin and come back no longer works. This loophole has been blocked by the market entry penalty imposed by the regulatory authorities.
It is reported that in this punishment, the relevant certified public accountants were not only fined, but also banned from the market for 10 years, 5 years and 3 years respectively.
■Industry observation
What are the audit institutions of ST listed companies?
In fact, the market has paid more attention to the financial report auditing of ST and *ST listed companies, because these companies may be at risk of suspending or even terminating their listing, and the pressure of the company's financial data is also the pressure of accounting firms.
According to wind statistics, Shell Finance reporters found that among the 227 ST and *ST listed companies, 35 audit institutions were involved.
Among them, Dahua Certified Public Accountants (24), Daxin Certified Public Accountants (19), Zhongxing Caiguanghua Certified Public Accountants (19), and Asia Pacific Group Certified Public Accountants (16) ranked the top three in terms of number of undertakings.
In addition, Lixin Certified Public Accountants, Tianjian Certified Public Accountants, Zhongshen Zhonghuan Certified Public Accountants, and Zhongxinghua Certified Public Accountants have undertaken more than 10 contracts.
From the perspective of 227 ST and *ST listed companies, only 4 have chosen PricewaterhouseCoopers, one of the "Big Four" accounting firms, and basically all the audit institutions selected by ST and *ST are on the list, and Ranked within 50.
Shenzhen Tangtangsuo is the only accounting firm that is not in the top 100 comprehensive evaluation in 2019.
According to wind data, the ST and *ST listed companies undertaken by Shenzhen Tangtang include ST Renzhi, *ST Qinshang, ST Jiajia and ST Modern.
It is understood that there are a large number of firms in my country, the audit level and audit quality are also uneven, and the corresponding audit fees are also different.
Industry insiders pointed out that generally speaking, the audit fees of well-known firms are higher, such as the international "Big Four" and the domestic "Big Eight".
According to the analysis, the audit fee is a very important criterion for enterprises to choose a firm. Under the same quality conditions, the enterprise must choose the accounting firm with the lowest audit fee. Therefore, if the enterprise can bear the higher audit fee, it will choose the high-profile audit firm. accounting firm.
Beijing News Shell Finance reporter Hu Meng, editor Yue Caizhou, proofreading to deal with Chunyi