China fines Deloitte $31 mln for auditing negligence

China’s finance ministry fined auditing firm Deloitte 211.9 million yuan ($30.8 million) for failing to perform its duty in assessing the asset quality of China Huarong Asset Management Co Ltd, the ministry said on its website on Friday.

Deloitte’s Beijing operations also will be suspended for three months, the ministry said in a statement.

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China Huarong and its investment arms were fined for internal governance lapses, risk control failures and severe inaccuracy of accounting information from 2014 to 2019, the statement added.

Deloitte’s Beijing office was not immediately reachable for comment.

Deloitte failed to discover the real situation of the underlying assets in its audit and ignored the approval compliance for Huarong’s major investment matters, the ministry said.

The accounting firm did not issue proper audit opinions on the identified abnormal transactions of Huarong, and it did not obtain sufficient and appropriate evidence when it provided auditing services, it added.

Huarong, one of four major state-owned distressed-debt managers, has been in turmoil after it failed to release its 2020 earnings on time, and eventually reported a huge loss.

The company later injected CITIC Group Corp as its largest shareholder in a government-led restructuring and has disposed of its non-core businesses.

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