26.6 C
Thursday, September 28, 2023

China’s Ministry of Finance Cracks Down on Financial Risk With Fines for Deloitte and Huarong

BusinessChina's Ministry of Finance Cracks Down on Financial Risk With Fines for Deloitte and Huarong

China’s Ministry of Finance has imposed fines on Deloitte & Touche and China Huarong Asset Management Co for lapses in internal governance and risk control between 2014 and 2019. Deloitte was fined RMB 211.9m ($30.8m) and its Beijing office’s operations were suspended for three months. Huarong and seven of its investment arms were fined RMB 800,000. This move shows that China is placing a greater emphasis on defusing financial risks and that auditing agencies will have to ensure their practices are more strictly monitored, according to experts.

The investigation began in 2021 and found that Deloitte failed to perform its duty in assessing properly the quality of assets of Huarong. The ministry’s investigation involved a special inspection group working on-site at both Huarong and Deloitte. The decision to fine both Huarong and Deloitte was based on interviews with the people concerned, reviews of relevant materials, extensive investigations and other opinions solicited.

In response, Deloitte said that it respects and accepts the fine and suspension. Zhu Chuanlu, a partner lawyer specializing in taxation law at Beijing Zhonglun W&D Law Firm, said that the ministry’s decision to impose a fine and suspend an auditing firm’s operations suggests that foreign auditors, when reviewing and auditing their clients, should “shed more light on the quality of the company, instead of focusing just on the size of it”, particularly against the backdrop of guarding against systemic risks. The ministry’s decision also means that auditors need to do a better job on due diligence, figuring out clearly about their clients’ operational status. A higher benchmark is also likely to define whether audit firms have fully completed their due diligence.

Read More:

Check out our other content

Check out other tags:

Most Popular Articles