Recently, since the delisting of Xinyi was terminated, whether ST shares will follow suit has attracted the attention of the market.
According to incomplete statistics, at least 13 ST companies changed their 2021 annual audit institutions during the year, of which 5 attracted regulatory inquiries due to changes.
On the evening of April 6, Zhengzhou Sino-Crystal Diamond Co.Ltd(300064) issued a risk warning, saying that the listing of shares may be terminated. According to the announcement, Zhengzhou Sino-Crystal Diamond Co.Ltd(300064) once issued an audit report with no opinion in the financial report of 2020, which has not been eliminated so far. If qualified opinions, unable to express opinions or negative opinions are issued in 2021, the listing will be terminated according to relevant regulations.
Some time ago, Zhengzhou Sino-Crystal Diamond Co.Ltd(300064) once attracted regulatory attention due to the change of the audit institution in 2021, and asked whether the increase of audit fees involved the purchase of audit opinions.
From the announcement, on the whole, ST company did not describe the reasons for changing the annual audit organization too much, and most companies only mentioned the decisions made out of comprehensive consideration of the company’s business development needs, audit needs and other actual conditions. At the same time, some companies disclosed that the audit institution was changed because the original audit institution was difficult to meet the needs of annual audit in terms of project schedule and personnel arrangement.
If ST company mentions the reasons for the change, it indicates that the company plans to hire an accounting firm after full communication and consultation, taking into account the needs of business development and audit, the personnel arrangement and work plan of the accounting firm and other actual conditions; Another company said that the original accounting firm had heavy audit tasks and personnel transfer. After careful examination of personnel and time arrangement, in order to ensure audit quality, it terminated its service.
At the same time, a few companies said that the replacement of annual audit institutions was due to the consideration of audit independence. If a company says that the original accounting firm has provided audit services for the company for many consecutive years, in order to better ensure the independence, objectivity and fairness of the audit work, the audit institution is changed.
“Regular rotation of accounting firms, or regular changes of accounting firms by listed companies out of audit independence, can enhance the independence of certified public accountants and improve audit quality.” Zhu Jiandi, chief partner of Lixin certified public accountants, told the reporter of Securities Daily that state-owned enterprises and state-owned banks have similar regulations. The regulatory authorities stipulated that the project partners and signed certified public accountants engaged in the audit of listed companies should rotate regularly for five years, but did not require listed companies to change their accounting firms regularly.
“By regularly changing accounting firms, some listed companies can avoid the risk of being questioned by the market about the prudence and objectivity of audit opinions due to their high closeness with the same audit institution.” Lawyer Luo Han, partner of Zhide law firm, told the reporter of Securities Daily that it should be noted that if it involves situations such as “large exchange for small exchange”, “high fee exchange for low fee exchange” and “exchange without changing intermediary team”, the behavior of changing accounting firms regularly still cannot fully prove the independence of audit objectively.
In the view of industry experts, there may be deeper reasons behind the replacement of annual audit institutions.
Zhu Jiandi analyzed that the change of the accounting firm may be due to the significant differences between the certified public accountant and the audit client on some major matters, and the audit client does not agree with the position of the certified public accountant for various considerations. If the certified public accountant refuses to negotiate properly, the audit client may hope to buy more satisfactory audit opinions by changing the accounting firm. Another possible situation is that there is a dispute between the audit client and the certified public accountant over the audit fee, and the accounting firm is dismissed on the grounds of dissatisfaction with the audit service and lack of professional competence.
At the same time, the changes of some companies attracted the attention of the exchange, and the Shenzhen Stock Exchange inquired about the changes of annual audit institutions of Zhengzhou Sino-Crystal Diamond Co.Ltd(300064) and other five companies. From the inquiry, the exchange focuses on the rationality of replacing the accounting firm, whether the original accounting firm has carried out some audit work, and whether there are differences of opinion with the original accounting firm.
In the view of industry experts, the main purpose of regulatory inquiry is to promote accounting firms to enhance audit independence and improve audit quality by standardizing the behavior of listed companies.
Luo Han believes that the core of audit independence lies in the financial standardization of listed companies and the independence and objectivity of the audit work of accounting firms. If the core requirements are not met, the audit independence of listed companies will still be questioned even if they change accounting firms regularly.
“Audit is a professional service with high investment, and there is an obvious positive correlation between audit cost and audit quality.” Zhu Jiandi said that when a listed company selects and employs an accounting firm, it is suggested to select an accounting firm by means of competitive negotiation and other methods that can fully understand the professional competence of the accounting firm. The selection criteria should highlight the quality factor and not take the quotation level as the main weight.
