Entering the annual report season, but the audit institution has not been found. Some companies are “calm” and have to worry the regulators.
According to the incomplete statistics of the reporter of Shanghai Securities News, as of February 16, 13 A-share companies had been urged by the exchange to hire the 2021 audit institution. Under the urging, some companies hastily changed their employment of audit institutions, but some companies are difficult to find even audit institutions.
“If the audited annual report is not disclosed within the statutory time limit, the company’s shares may be subject to the risk of delisting.” The Shanghai Stock Exchange and Shenzhen Stock Exchange have repeatedly stressed in relevant letters that according to the requirements of the new delisting regulations, listed companies should disclose their annual reports within four months from the end of each fiscal year, and the financial statements in the annual reports should be audited by accounting firms.
In fact, most of the above 13 companies have been implemented risk warning, and many problems make the audit of accounting firms more difficult. Insiders believe that the letter sent by the exchange urging the company to select and hire an audit institution is also to reveal risks to the market. If a company cannot determine the audit institution before the end of February, even if it is not clear that the company will be delisted, it can also indicate that it has a high risk.
ST company is the main force of “difficult selection and employment”
Most of the companies urged by the exchange are ST companies. We can see that their own situation is more complex, which is also the reason for the delay in hiring audit institutions.
Taking Hubei Wuchangyu Co.Ltd(600275) as an example, the company decided to renew the appointment of Zhongqin Wanxin Certified Public Accountants (special general partnership) (hereinafter referred to as “Zhongqin Wanxin”) as the audit institution in 2021 on November 4, 2021. On January 27, 2022, Zhongqin Wanxin sent a letter saying that due to the large volume of business, it has not yet carried out the audit of Hubei Wuchangyu Co.Ltd(600275) 2021. After careful evaluation of various factors, it is expected that the audit work can not be completed on schedule, and requested not to continue to serve as the Hubei Wuchangyu Co.Ltd(600275) audit institution.
The situation of Hubei Wuchangyu Co.Ltd(600275) is not optimistic behind the “breach” of Zhongqin Wanxin near the disclosure period of the annual report. The financial report of Hubei Wuchangyu Co.Ltd(600275) 2020 was issued by Zhongqin Wanxin with an unqualified opinion audit report highlighting the event segment, other event segments or major uncertainties related to going concern. At the same time, the lower of the company’s net profit before and after non deduction in 2020 is negative, and the operating income after special deduction is less than 100 million yuan, which touches the financial delisting risk warning situation and is subject to delisting risk warning.
Correspondingly, Hubei Wuchangyu Co.Ltd(600275) is expected to have an operating income of about 110 million yuan in 2021. After deducting the operating income irrelevant to the main business and without commercial real income, it will have an operating income of about 106 million yuan, a net profit loss of about 28.5 million yuan and a net profit loss of 34.5 million yuan.
Now, after Hubei Wuchangyu Co.Ltd(600275) agreed to the above “breach of contract”, as of February 16, 2022, it has not disclosed whether to hire the 2021 audit institution, but it has made an appointment to disclose the 2021 annual report on April 30, 2022.
“When a listed company selects an accounting firm, the other party should also evaluate the risk of the listed company. This is a two-way choice.” The head of an accounting firm said that audit institutions are under great pressure. Some large-scale accounting firms have many high-quality customers, so there is no need to deliberately undertake the audit business of ST company, which affects the development of other businesses.
On January 25, 2022, Henan Kedi Dairy Co.Ltd(002770) replied to the concern letter, saying that the audit institution to be hired has been stationed in the company, but many of its problems may frighten the accounting firm. Henan Kedi Dairy Co.Ltd(002770) delisting risk warning was implemented on May 6, 2021, mainly because the 2020 financial report was issued with an audit report that could not express an opinion. Based on the company’s existence of other receivables, confirmation of estimated liabilities, suspected violations of laws and regulations, it was filed for investigation by the CSRC.
On September 16, 2021, Henan Kedi Dairy Co.Ltd(002770) received the decision on administrative punishment and market entry prohibition issued by Henan securities regulatory bureau and other documents, which showed that the annual reports of the company in 2016, 2017 and 2018 had false records and major omissions, and did not fulfill the relevant temporary information disclosure obligations from 2016 to 2019 as required.
Accepting the appointment of Henan Kedi Dairy Co.Ltd(002770) is a great challenge for accounting firms. Henan Kedi Dairy Co.Ltd(002770) said that there were false records and major omissions in the company’s annual reports from 2016 to 2018. The company will hire an accounting firm to comprehensively audit the corrected financial statements and issue a new audit report or special assurance report. As of January 25, 2022, Henan Kedi Dairy Co.Ltd(002770) is still accelerating the above work.
Ye Xiaojie, director of the annual report research center of listed companies of Shanghai National Institute of accounting, believes that ST companies generally have problems in operating performance, corporate governance or other aspects. From the perspective of accounting firms, the internal problems of ST company are relatively complex, and the risk of providing audit business is large. After fully measuring the risk and income, the willingness to undertake the audit business of this kind of company is relatively low. Therefore, such companies may indeed encounter the situation that they cannot select and hire an annual audit institution.
shareholders’ differences lead to “difficulty in changing employment”
In addition to the poor operation and difficulty in hiring audit institutions, the disagreement of important shareholders of listed companies will also lead to delays in hiring audit institutions.
On November 9, 2021, Shandong Sinobioway Biomedicine Co.Ltd(002581) announced that it planned to appoint Shenzhen Jiu’An Certified Public Accountants (special general partnership) (hereinafter referred to as “Jiu’An firm”) as the audit institution in 2021, mainly ZTE caiguanghua Certified Public Accountants (special general partnership), the original audit institution, has been filed for investigation by the CSRC, affecting the development of the company’s audit affairs.
However, at the extraordinary general meeting of shareholders held on November 24, 2021, Shandong Sinobioway Biomedicine Co.Ltd(002581) the proposal to change the audit institution was voted down by shareholders. On January 27, 2022, the Shenzhen Stock Exchange issued a letter of concern, pointing out that Shandong Sinobioway Biomedicine Co.Ltd(002581) has not yet hired the 2021 audit institution, and the company made an appointment to publish the 2021 annual report on April 30, 2022.
Ye Xiaojie said: “the change of employment of audit institutions by listed companies has been rejected by the general meeting of shareholders. It may be that there are differences of opinion among different shareholders and restrict each other at the general meeting of shareholders.”
In fact, Shandong Sinobioway Biomedicine Co.Ltd(002581) whether the proposal to change the appointment of audit institutions has long been heralded. At the board meeting held on November 5, 2021, Shandong Sinobioway Biomedicine Co.Ltd(002581) director Yu Xiuyuan cast a negative vote and pointed out that the practice ability of Jiu’An firm was insufficient. Its project partner and signing accountant were administratively punished by the CSRC in 2008, and their practice years were short. It is suggested to choose the top audit institution in China. By the end of 2020, Jiu’An firm had 2 partners, 15 certified public accountants and 20 employees respectively. The total income of 1.1075 million yuan in that year came from audit business.
In the face of the approaching annual report disclosure deadline, it seems more difficult for Shandong Sinobioway Biomedicine Co.Ltd(002581) to select and hire audit institutions in 2021.
Shenzhen Stock Exchange pointed out that Shandong Sinobioway Biomedicine Co.Ltd(002581) should fully demonstrate the professional competence of the selected accounting firm and perform the necessary review procedures in accordance with the relevant provisions of the stock listing rules (revised in 2022) and in combination with the professional qualification, personnel information, business scale, investor protection ability, independence and integrity of the accounting firm, Select and employ audit institutions in accordance with the law as soon as possible.
it’s “not good” to rush to hire a small Institute
After several times of urging by the exchange, Xiamen Overseas Chinese Electronic Co.Ltd(600870) and other companies plan to select and employ the audit institution in 2021, and the scale of the accounting firm to be selected and employed is significantly smaller than that of the previous audit institution.
On January 14 and January 28, the Shanghai stock exchange sent letters to Xiamen Overseas Chinese Electronic Co.Ltd(600870) twice, requiring the company to attach great importance to the preparation and disclosure of the 2021 annual report, hire the 2021 annual audit institution as soon as possible and actively cooperate, disclose the annual report on schedule, and ensure the authenticity, accuracy and completeness of information disclosure.
On February 9, Xiamen Overseas Chinese Electronic Co.Ltd(600870) announced that due to the project schedule of Daxin Certified Public Accountants (special general partnership) (hereinafter referred to as “Daxin”), it was unable to meet the disclosure time requirements of the company’s annual report in 2021, and it was proposed to appoint Unitech Zhenqing Certified Public Accountants (special general partnership) (hereinafter referred to as “Unitech Zhenqing”) as the company’s audit institution in 2021.
From a number of indicators, the strength of younita Zhenqing is weaker than that of Daxin. Unitech Zhenqing was founded on July 9, 2020. At the end of 2021, there were 42 partners, 181 certified public accountants and 12 certified public accountants who signed the audit report of securities service business respectively. There was one audit client of listed company. The total revenue in 2020 was 76.5985 million yuan and the audit revenue was 52.3788 million yuan.
Founded in 1985, Daxin has 156 partners, 1042 certified public accountants and more than 500 people who have signed audit reports on securities service business by the end of 2021. In 2020, the business income was 1.832 billion yuan and the audit income was 1.568 billion yuan. There were 181 annual report audit customers of listed companies (including H-share companies).
Xiamen Overseas Chinese Electronic Co.Ltd(600870) is not doing well. The company estimates that the net profit in 2021 will be – 6.1 million yuan to – 3.6 million yuan, and the net profit after deduction will be – 7.6 million yuan to – 5.1 million yuan. In 2020, the company’s net profit after deducting non-profit was negative and its operating income was less than 100 million yuan, which touched the warning situation of financial delisting risk, and the stock was subject to “delisting risk warning”.
“Generally speaking, the larger the scale and the longer the establishment time of accounting firms, the audit quality is relatively more guaranteed.” Ye Xiaojie believes that the “qualification” of the accounting firm to be selected and employed by a listed company is lower than that of its predecessor, which belongs to the transformation from “large institute” to “small Institute”, which itself releases a bad signal.
“not employed” or often
“After the release of the new delisting regulations, the regulatory requirements for accounting firms are higher.” It is expected that some companies will not be able to hire non auditors in 2022.
Among the companies urged to select audit institutions, Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) is special. On January 17, January 27 and February 11, 2022, Shanghai Stock Exchange successively sent letters to Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) urging the selection and employment of audit institutions in 2021 as soon as possible. At the same time, Xinjiang securities regulatory bureau also sent a letter of concern to Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) .
Previously, Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) was rejected by many accounting firms as the auditor of 2019. Finally, Shenzhen Tangtang accounting firm (hereinafter referred to as “Tangtang office”) took over the “hot potato”. Tangtang office was established in December 2004. Before undertaking the annual audit business of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) , it is mainly engaged in small and micro enterprise audit, capital verification, agency bookkeeping and other businesses.
Subsequently, Tangtang Institute issued a “qualified opinion” audit report on the Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) 2019 financial report, which led the CSRC to file a case for investigation. The investigation found that the audit independence of Tangtang office was seriously lacking, and helped Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) avoid delisting. On January 7, 2022, the CSRC reported that it planned to impose an administrative penalty of “six penalties for no one” on Tangtang according to law, and the suspected crime of relevant subjects would be transferred to the public security organ.
In the view of insiders, Tangtang knows that there are problems in the financial and accounting treatment of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) important matters, and also cooperates with Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) to adjust audit evidence to mislead investors. The nature of the behavior is bad and the illegal circumstances are serious. The CSRC said that the capital market is based on high-quality information disclosure, and the audit and evaluation institution is the “gatekeeper” to ensure the quality of financial information of public companies.
Ye Xiaojie said that in the context of the promotion of the comprehensive registration system reform, all parties have more and more strict requirements on the quality of information disclosure, and accounting firms, as important intermediaries, bear more and more responsibilities. Therefore, in recent years, the regulatory authorities have continued to strengthen the supervision of the annual report audit of listed companies and constantly stressed the need to compact the responsibilities of accounting firms.
