Deloitte’s “Kelongmen” incident exposed “five sins”

The industry reflects on the "super-national treatment" of foreign-funded accounting firms. The China Securities Regulatory Commission held a hearing on administrative penalties against Deloitte yesterday. Industry insiders believe that the "Kelongmen" incident has sounded the alarm: foreign-funded accounting firms are in China The market has conquered cities and territories, but high “tuition fees” have not resulted in high-quality integrity. The unfair competitive environment brought about by “super-national treatment” needs to be changed urgently.

Deloitte’s “Five Sins”

It is understood that the China Securities Regulatory Commission basically completed its investigation into the main facts of Deloitte’s violations last year. An authoritative person recently revealed that Deloitte's violations generally include five aspects: first, the audit procedures performed on inventory and main business costs are insufficient and inappropriate; second, the necessary professional prudence is lacking in the inventory drawing process. The scope of the draw was inappropriate and the audit procedures performed were insufficient; third, the procedures performed during the audit of accounts receivable and main business income were insufficient, and the method of corroboration was inappropriate; fourth, Deloitte failed to report on Kelon Electric In 2003, it was confirmed that Hefei Vichy's sales revenue of 304.84 million yuan had been corrected or dealt with in the 2003 audit report issued by it, and the amount of reservations in its 2004 audit report was wrong; 5. Deloitte's internal bills of Kelon Electric Discounting failed to pay due attention and no major errors were found in Kelon Electric's 2003 cash flow statement.

When pointing out that Deloitte lacked "necessary professional prudence," people familiar with the matter said that after preliminary investigation, Deloitte had failed to review Kelon's annual report for three consecutive years. Bao? Ci Amaranth Fan ǔ Zhuo Zhong Xing у certain banyan Tan Duan в? Jia Wei 殮 Ci Qian ⑾ Zhi Ping? 缙筍ü? Hoop gang twist dumplings coffee leisurely 榧姧? Taipa stick 氲 Nai Shi Suan h Huan? Ping? Jin The shipment records were fabricated on the books from 2002 to the end of 2004. The above-mentioned inventory is still sealed in the warehouse, but the book quantity balance is zero. During the period from 2002 to 2004, there were a large number of inbound and outbound records in the above-mentioned warehouses with a zero balance at the end of the year. Deloitte should pay attention to these warehouses with a zero balance and conduct sampling of these warehouses, but Deloitte did not Sampling of these warehouses was carried out, and adjustments were made to increase the revenue of Kelon Electric based on the uninvoiced list of outbound warehouses in the inventory discrepancy table provided by Kelon Electric. entries and its audit procedures are inadequate.

Suspected of violating the Securities Law

An authoritative source said that if there are no new facts or objections to make changes, then Deloitte’s above-mentioned behavior violated the “Stock Issuance and Trading Management” Article 35 of the Interim Regulations constitutes the conduct described in Article 73 of the Regulations; at the same time, it is suspected of violating the provisions of Article 173 of the Securities Law, constituting Article 160 of the Criminal Law conduct described in Article 1.

Article 73 of the "Interim Regulations on the Administration of Stock Issuance and Transactions" stipulates that accounting firms, asset appraisal agencies and law firms violate the provisions of these regulations by issuing documents that contain false or seriously misleading content or If there are any major omissions, a warning, confiscation of illegal gains, or a fine will be imposed, either alone or in combination, depending on the circumstances; if the circumstances are serious, the person's securities business will be suspended or his or her license to engage in the securities business will be revoked. Certified public accountants, professional evaluators and lawyers who are directly responsible for the acts listed in the preceding paragraph shall be given a warning or fined not less than RMB 30,000 but not more than RMB 300,000; if the circumstances are serious, their qualifications to engage in securities business shall be revoked.

Article 161 of the "Criminal Law" stipulates that if a company provides false financial accounting reports or conceals important facts to shareholders and the public, and seriously damages the interests of shareholders or other persons, it shall be directly responsible for it. The person in charge and other persons directly responsible shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also or solely be fined not less than 20,000 yuan but not more than 200,000 yuan.

Quality integrity and the unfair competitive environment brought about by "super-national treatment" need to be changed urgently.

In fact, as early as 2001, foreign accounting firms began to encounter the "integrity scandal" in China. KPMG became a defendant in China for alleged financial fraud in the Jinzhou Port case, creating three new rules in China's securities market. "First" has triggered a new understanding of the "Big Four" in society: first, intermediaries and accounting firms became defendants for the first time in a securities civil compensation case; second, overseas institutions became defendants for the first time in this case; third, international The famous "Big Four" became defendants in China for the first time. In July 2005, the Ministry of Finance issued an announcement on the quality inspection of accounting information, and PricewaterhouseCoopers was ordered to make rectifications.

Many experts interviewed by reporters believe that the “Big Four” cannot be blindly trusted. In 2002, Arthur Andersen, one of the “Big Five” companies at the time, declared bankruptcy due to the financial scandal of Enron in the United States, triggering a crisis of trust in the accounting industry. Berardino, then CEO of Arthur Andersen, once said: "We are not the first, nor will we be the last, accounting firm to find itself in this predicament."