The accounting firm failed to properly look into the status of Huarong’s underlying assets, ignored compliance approvals on major investments and failed to apply a sense of skepticism in its audit work on Huarong, the ministry said. Huarong had several internal and risk control failures and distorted its accounting which Deloitte missed, according to the statement.
China suspended the operations of Deloitte Touche Tohmatsu Ltd.’s Beijing office for three months and imposed an unprecedented fine over lapses in its auditing work of bad-debt manager China Huarong Asset Management Co.
After several on-site inspections, personnel interviews, a review of paperwork and a hearing, the Ministry of Finance found that Deloitte had “serious audit deficiencies” in its work with Huarong between 2014 and 2019, according to a statement. The firm was fined 212 million yuan (US$30.8 million or $41.4 million), or more than 25 times the combined fines the ministry meted to accounting firms during inspections last year.
