According to the administrative penalty decision disclosed by Shenzhen Securities Regulatory Bureau on the 16th, Shenzhen Securities Regulatory Bureau conducted an investigation and trial on the case of Dahua Certified Public Accountants (special general partnership) (referred to as Dahua) for failing to diligently audit the annual report of Changyuan Group. , finally issued a fine and decided to order Dahua to make corrections, confiscate business income of 3.8679 million yuan, and impose a fine of 7.7358 million yuan, with a total of 11.6038 million yuan in fines and confiscations.
Dahua was issued with fines and fines totaling more than 10 million yuan
According to the Shenzhen Securities Regulatory Bureau's Administrative Penalty Decision, Shenzhen Securities Regulatory Bureau determined that Dahua had the following illegal facts.
First, the annual audit reports of Changyuan Group in 2016 and 2017 issued by Dahua contained false records.
The decision on administrative punishment pointed out that after investigation, Changyuan Heying Intelligent Technology Co., Ltd. (hereinafter referred to as Changyuan Heying), a holding subsidiary of Changyuan Group, made false overseas sales, confirmed income in advance, repeatedly confirmed income, signed "yin and yang contracts", Project accounting did not comply with accounting standards and other means to inflate performance, resulting in false records in the financial data disclosed in Changyuan Group's 2016 and 2017 annual reports. Shenzhen Securities Regulatory Bureau has imposed administrative penalties.
Dahua provided audit services for Changyuan Group's 2016 and 2017 annual reports, and issued standard unqualified opinions on Changyuan Group's 2016 and 2017 financial statements on March 10, 2017 and April 20, 2018 respectively. The audit report contains false records.
Changyuan Group's 2016 annual financial statement audit report signed the certified accountants Liu Jiqiang and Zhang Hongfu, and the financial statement audit service fee was 2 million yuan; the 2017 annual financial statement audit report signed the certified accountants Mo Jianmin and Chen Liang, and the financial statement audit service fee 2.1 million yuan.
Second, Dahua Office did not perform its due diligence in auditing the annual financial statements of Changyuan Group in 2016 and 2017, including deficiencies in identifying and assessing the risk of material misstatement; deficiencies in the confirmation procedures for accounts receivable; Professional skepticism: prudent evaluation of the audit evidence obtained; failure to obtain sufficient and appropriate audit evidence; failure to prudently evaluate abnormal relationships identified in the implementation of analytical procedures; failure to reasonably exercise professional judgment; error in calculation of data when consolidating statements, etc.
The decision on administrative punishment stated that on June 7, 2016, Changyuan Group acquired 80% of Changyuan Heying’s equity in cash.
There is a performance commitment in the acquisition, that is, the net profit of Changyuan and Eagle after deducting non-recurring gains and losses from the cumulative consolidated statements in 2016 and 2017 is not less than 350 million yuan; if the performance of Changyuan and Eagle does not reach the promised target, the performance compensation The obligor must make performance compensation, and the amount of compensation = (350 million yuan - net profit after deducting non-recurring gains and losses from the cumulative consolidated statement during the performance commitment period) ÷ 350 million yuan × total share transfer price × 64.20%.
Changyuan Group disclosed that the total net profit of Changyuan and Eagle after deducting non-recurring gains and losses in 2016 and 2017 was 332,006,200 yuan, and the performance commitment completion rate was about 95%, which was close to the standard.
In 2016, Dahua Institute did not fully understand the audited entity and its environment, did not identify the fraud motives and pressures of Changyuan and Eagle due to their performance commitments, and did not properly assess the fraud risk of Changyuan and Eagle in revenue recognition, which did not meet the requirements of the Auditing Standards for Chinese Certified Public Accountants No. 1141—Responsibility for Fraud in Financial Statement Auditing (Cai Kuai [2010] No. 21) Article 25, and Auditing Standards for Chinese Certified Public Accountants No. 1211—By understanding the audited entity and the risk of material misstatement in environmental identification and assessment” (Cai Kuai [2010] No. 21) Article 14 and Article 31.
In addition, the administrative penalty decision also pointed out that Dahua’s account receivable confirmation procedures were flawed:
1. The confirmation procedure has not been implemented for some large accounts receivable.
In 2016, AGMS Co., Ltd., a subsidiary of Changyuan and Eagle, had two transactions with JD&TOYOSHIMA CO., LTD. and NAGAPEACE CORPORATION LIMITED, each with an amount of 2.92 million US dollars, resulting in a total accounts receivable balance of 5.84 million US dollars, equivalent to RMB 40,529,600 yuan, the amount is significant, but Dahua Office did not confirm the two accounts receivable during the audit of the 2016 annual report, nor did it explain the reasons for the lack of confirmation in the audit draft, which is not in line with the "China Registration". The provisions of Article 13 of the Auditing Standards for Accountants No. 1312 - Correspondence (Cai Kuai [2010] No. 21);
2. No further audit evidence was obtained for the reply letter with doubts about its reliability to eliminate doubts.
First, UOB implemented the letter of account receivable for Cambodian customers Chenghao (Cambodia) Fashion Co., Ltd., Xinfengjing (Cambodia) Co., Ltd., and Xinhaijie Garment Factory Co., Ltd. in 2016, and received the same express reply letter , the sender is Vietjet International Co., Ltd., and the mailing address is 1st Floor, No. 55, Lane 514, Fuxing North Road, Zhongshan District, Taipei City.
In response to the unusual situation that the reply letters from the three clients were the same express and the sender was not the client who confirmed the letter, Dahua Law Firm did not record the further audit procedures implemented in the manuscript, nor did it explain the situation.
Second, in the audit of the 2017 annual report of Dahua Institute, between the two documents of the letter of inquiry and confirmation of the current accounts of Anhui Hongai Industrial Co., Ltd. Co., Ltd. (hereinafter referred to as Heying Equipment, a wholly-owned subsidiary of Changyuan Heying Holding Subsidiary Shanghai Otech Intelligent Technology Co., Ltd.) has a different seal location. Dahua Law Firm has not paid attention to this abnormal situation and has not found The reply letter and the sending letter are not the same confirmation.
The third is that the handwritten sender on the express receipt of Anhui Hongai's reply letter is Anhui Hongai, and the mailing address is Susong County, Anhui Province. The straight-line distance from the registered place of Eagle is less than 2 kilometers.
Dahua Law Firm did not effectively verify the route of the reply letter, and did not find that the actual mailing address of the reply letter of Anhui Hongai was inconsistent with its business office.
In response to the above situation, Dahua Law Firm did not check whether the reply letter came from the person expected to be inquired, and the reply letter with doubtful reliability did not obtain further audit evidence to eliminate doubts, which did not comply with the Auditing Standards for Chinese Certified Public Accountants No. 1312 - Corroboration Article 17, "China Certified Public Accountants Auditing Standards No. 1141 - Relevant Responsibilities for Fraud in Financial Statement Auditing" (Cai Kuai [2010] No. 21) Article 14;
3. Alternative procedures have not been implemented for some customers who have not responded.
Heying International Co., Ltd. (hereinafter referred to as Heying International), a wholly-owned subsidiary of Changyuan Heying, confirmed the sales revenue of hanging products to Cambodian customer DAS XING GARMENT of USD 930,000 in December 2017, and formed accounts receivable at the end of 2017 The balance is $837,300.
Dahua issued a confirmation letter to DAS XING GARMENT on the balance of accounts receivable, but did not receive a reply, nor did it implement alternative procedures, which did not comply with Article 19 of the Auditing Standards for Chinese Certified Public Accountants No. 1312 - Correspondence Provisions.
Shenzhen Securities Regulatory Bureau believes that, during the audit of Changyuan Group’s 2016 and 2017 annual financial statements, Dahua did not follow the relevant requirements of the Auditing Standards for Chinese Certified Public Accountants and other relevant requirements. Issued a correct audit opinion and issued an audit report of financial statements with false records, which violated the relevant provisions of Article 173 of the 2005 Securities Law and constituted Article 223 of the 2005 Securities Law The behavior of "securities service institutions fail to perform their duties diligently, and the documents produced and issued contain false records, misleading statements or major omissions".
The signing certified public accountants Liu Jiqiang and Zhang Hongfu are the supervisors who are directly responsible for the audit report of Changyuan Group's 2016 annual financial statements issued by Dahua; The person in charge directly responsible for the 2017 annual financial statement audit report of the Park Group.
It is worth noting that the parties and their agents pointed out in the hearing and defense materials that the financial fraud of Changyuan and Eagle, a subsidiary of Changyuan Group, is characterized by concealment and complexity, and Dahua has identified and evaluated potential frauds during the audit process. Risks; accounts receivable confirmation procedures are in place; prudently evaluate audit evidence and maintain due professional skepticism; have obtained sufficient and appropriate audit evidence to support the corresponding audit conclusions; prudently evaluate abnormal relationships identified during the audit process Reasonable use of professional judgment; the audit has been diligent and responsible, and the existence of audit defects does not constitute a situation of failure to perform due diligence; the "Advance Notice of Administrative Penalty" confuses "accounting responsibility" and "auditing responsibility"; this case has passed the statute of limitations for administrative penalty prosecution ; The annual audit business income is determined not to be tax deductible.
The parties and their agents believed that although their actions had certain flaws, they did not constitute a violation of the 2005 Securities Law, and actively cooperated with our bureau in investigating and punishing illegal acts, requesting exemption from punishment.
In this regard, Shenzhen Securities Regulatory Bureau conducted a review.
Finally, according to the facts, nature, circumstances and the degree of social harm of the parties’ illegal acts, and in accordance with Article 223 of the Securities Law of 2005, Shenzhen Securities Regulatory Bureau decided to order Dahua Certified Public Accountants (special general partnership) to make corrections. , 3.8679 million yuan of business income was confiscated, and a fine of 7.7358 million yuan was imposed. Based on this calculation, the total fines and confiscations reached 11.6038 million yuan; in addition, the Shenzhen Securities Regulatory Bureau also warned Liu Jiqiang, Zhang Hongfu, Mo Jianmin, and Chen Liang, and imposed them respectively. 60,000 yuan fine.
It is not uncommon for accounting firms to be fined
It is worth noting that it is not uncommon for accounting firms to be ticketed.
Just in April this year, ShineWing Certified Public Accountants (referred to as ShineWing) was also issued a fine.
According to the information disclosed by the China Securities Regulatory Commission, and in accordance with the relevant provisions of the Securities Law of the People's Republic of China revised in 2005 (hereinafter referred to as the "Securities Law" of 2005), the China Securities Regulatory Commission issued an order to ShineWing in LeTV Information Technology (Beijing) Co., Ltd. ( In the 2015 and 2016 annual report auditing business, LeTV conducted an investigation and trial on the case of failing to perform diligently and due diligence, and informed the parties of the facts, reasons, and basis for the administrative punishment and the rights of the parties in accordance with the law.
None of the parties made statements or defense opinions, nor did they request a hearing. The investigation and trial of this case have now been concluded.
The China Securities Regulatory Commission pointed out that ShineWing failed to perform its duties diligently when auditing the 2015 financial statements of LeTV, and the report issued contained false records, and when auditing the 2016 financial statements of LeTV, it failed to perform its duties diligently, and the report issued contained false records. .
The China Securities Regulatory Commission decided to order ShineWing Certified Public Accountants to correct its violations, confiscate business income of 1.5094 million yuan, and impose a fine of 3.0189 million yuan.
In November 2021, the China Securities Regulatory Commission also issued a fine to Zhongtianyun Accounting Firm (Special General Partnership) (hereinafter referred to as Zhongtianyun), ordered Zhongtianyun Accounting Firm (special general partnership) to make corrections, and confiscated 5.75 million of its business income. and a fine of $11.5 million.
In October 2021, the China Securities Regulatory Commission issued a fine to Beijing Xinghua Certified Public Accountants (special general partnership) (referred to as Beijing Xinghua), ordered Beijing Xinghua Certified Public Accountants (special general partnership) to correct its violations, and confiscated 100 of its audit business income. RMB 1 million and a fine of RMB 1 million.