Near the disclosure period of the annual report in 2021, nearly 100 listed companies have changed their employment of audit institutions.
According to the incomplete statistics of the reporter of Shanghai Securities News, from November 30, 2021 to January 12, 2022, 97 companies, including Cloud Live Technology Group Co.Ltd(002306) , Elefirst Science & Technology Co.Ltd(300356) , Nanjing Red Sun Co.Ltd(000525) , planned to change the audit institution in 2021, of which 8 companies received a letter of concern or inquiry, and were asked to explain whether there was any secret about the change of audit institution. Among the 97 companies, 22 are st family, with different risk warnings.
According to the reporter’s observation, there are two main reasons for the change of employment: either the accounting firm resolutely resigns, or the listed company wants to hire another expert.
When answering a reporter’s question on January 7, 2022, the person in charge of relevant departments of the CSRC said: “accounting firms are important gatekeepers in the capital market. Their law-abiding awareness, professional ability and diligence are related to the vital interests of the majority of investors.”
In view of the phenomenon that some listed companies take the initiative to change the employment of accounting firms on the eve of the disclosure of annual reports, ye Xiaojie, director of the annual report research center of listed companies of Shanghai National Institute of accounting, said that from the cases of financial fraud in the capital market in recent years, there is a situation that listed companies can not agree with the original audit institutions, and then buy audit opinions by changing the employment of audit institutions. Therefore, this change of employment signal is easy to attract more attention and speculation from all parties in the market.
22 ST companies plan to hire audit institutions
Among the 97 companies that plan to re employ the annual audit institution in 2021, 22 are st groups that have been supervised and implemented risk warning.
Taking Elefirst Science & Technology Co.Ltd(300356) as an example, based on the actual situation of the company’s 2021 financial report audit workload and project scheduling, Zhonghua Certified Public Accountants (special general partnership) (hereinafter referred to as “Zhonghua firm”) proposes not to continue to serve as the company’s 2021 audit institution. In this regard, Elefirst Science & Technology Co.Ltd(300356) hoped that the two sides would continue to cooperate, and finally failed to obtain the consent of Zhonghua office. Elefirst Science & Technology Co.Ltd(300356) it was announced on the evening of January 6, 2022 that it was proposed to hire Shenzhen Jiu\’An Certified Public Accountants (special general partnership) (hereinafter referred to as “Jiu\’An firm”) as the audit institution in 2021.
It can be seen from retrospect that Zhonghua firm has been providing audit services for Elefirst Science & Technology Co.Ltd(300356) from 2012 to January 2022, and only issued an audit report with qualified opinions on its 2020 financial report. Zhonghua office said that the company’s controlling shareholder Jiangsu Guangyi Investment Management Co., Ltd. (hereinafter referred to as “Guangyi investment”) has the problem of occupation of non operating funds.
Due to the above problems, Elefirst Science & Technology Co.Ltd(300356) shares have been subject to other risk warnings since the opening of the market on May 31, 2021, and the stock abbreviation has been changed from “Guangyi Technology” to ” Elefirst Science & Technology Co.Ltd(300356) “. As of January 4, 2022, Guangyi investment has returned the occupied Elefirst Science & Technology Co.Ltd(300356) funds totaling 48.8 million yuan, and about 200 million yuan of the occupied funds have not been returned, accounting for 20.44% of the latest audited net assets of Elefirst Science & Technology Co.Ltd(300356) .
“We should cherish our feathers!” The head of an accounting firm said that regardless of the reasons mentioned in the announcement, no matter how good an accounting firm, as long as there are one or two bad projects, the outside world will have a bad impression on it. In addition, in recent years, accounting firms have been involved in fraud cases of many companies, resulting in their being closely watched by regulators.
In addition to the resignation of the accounting firm on the grounds of “too busy”, the company represented by Henan Senyuan Electric Co.Ltd(002358) said that considering the future business development and audit needs, in order to ensure the smooth progress and effective communication of the audit work, it plans to hire an audit institution in 2021. Henan Senyuan Electric Co.Ltd(002358) it was announced on December 1, 2021 that the audit institution planned to hire Lianda Certified Public Accountants (special general partnership) in 2021.
However, ShineWing Certified Public Accountants (special general partnership), the original audit institution, issued an audit report with qualified opinions on the financial report of Henan Senyuan Electric Co.Ltd(002358) 2020, which mainly involves the deduction of the company’s funds, the provision for credit losses of accounts receivable and prepayments. As a result, the company has been implemented “other risk warning” since April 30, 2021, and the securities abbreviation has changed from “Senyuan electric” to ” Henan Senyuan Electric Co.Ltd(002358) “.
It is worth noting that Henan Senyuan Electric Co.Ltd(002358) also hired the chief financial officer at the same time as the auditor. Henan Senyuan Electric Co.Ltd(002358) said that Zhao Qiao applied to resign as deputy general manager and chief financial officer of the company on the grounds of personal health. After his resignation, he did not hold any position in the company. The company decided to hire Zhang Hongmin as chief financial officer.
According to Ye Xiaojie’s analysis, the reasons for the listed company to hire an audit institution need to be comprehensively considered in combination with the previous cooperation years and types of audit opinions of both parties. Judging from the current announcement, some accounting firms have issued the audit report with non-standard opinions on the financial statements of listed companies last year, and they have suddenly encountered a change of employment in the near future. In particular, listed companies have shell protection or other pressures, which should be analyzed in combination with their fundamentals, stock price performance, governance and so on.
the exchange quickly asked 8 companies
For 97 companies to change the employment of audit institutions, the exchange quickly issued a letter of concern or inquiry to 8 companies such as Elefirst Science & Technology Co.Ltd(300356) , Shenzhen Fountain Corporation(000005) , Xinjiang Machinery Research Institute Co.Ltd(300159) and Guangzhi technology, asking the company and the accounting firm to explain in detail the reasons for the change of employment and whether there was any secret about this behavior.
For example, Elefirst Science & Technology Co.Ltd(300356) on January 6, it announced the appointment of an audit institution. On January 7, it received a letter of concern from Shenzhen Stock Exchange, asking the company to explain the communication with Zhonghua firm, whether there are other reasons leading to the “temporary withdrawal” of Zhonghua firm, and whether the proposed Jiu\’An firm has the corresponding ability as an audit institution.
In combination with the audit of Elefirst Science & Technology Co.Ltd(300356) 2020 financial report and the audit work of 2021 financial report, Zhonghua firm needs to explain whether it pays attention to major matters affecting the audit opinion of the company’s 2021 financial report and whether there are differences with the company in audit work arrangement, fees, audit opinions, etc.
At the same time, the supervision shall pay attention to whether the audit institution to be re employed has the corresponding ability. On December 16, 2021, Shenzhen Fountain Corporation(000005) received a letter of concern from Shenzhen Stock Exchange, which required to explain whether the proposed appointment of China Audit Asia Pacific Certified Public Accountants (special general partnership) (hereinafter referred to as “China Audit Asia Pacific”) as the audit institution in 2021 has the professional competence to undertake the company’s business.
Shenzhen Fountain Corporation(000005) it was announced on December 14, 2021 that China audit Zhonghuan Certified Public Accountants (special general partnership) (hereinafter referred to as “China audit Zhonghuan”) undertakes many audit projects, and the company’s business projects are scattered. Due to personnel deployment, it is impossible to ensure the completion of the audit work within the specified time, so it is proposed to hire China Audit Asia Pacific as the audit institution in 2021.
Shenzhen Fountain Corporation(000005) is mainly engaged in environmental protection projects. The projects are located in more than 10 provinces such as Guangdong and Zhejiang. There are a large number of new projects in 2021.
At the same time, the epidemic situation occurred repeatedly in many places in 2021, resulting in complex and changeable on-site audit environment and prolonged audit time. More personnel need to be deployed to the project site.
In response, China Audit Asia Pacific said in the reply to the letter of concern that it has understood the specific reasons for the qualified audit report on the financial report of Shenzhen Fountain Corporation(000005) 2020 and has the professional competence to undertake the company’s business.
However, the scale of China Audit Asia Pacific is significantly smaller than that of China audit Zhonghuan. At the end of 2020, the number of partners, certified public accountants and certified public accountants who signed the audit report of securities service business in China Audit Asia Pacific were 53, 467 and 184 respectively; In 2020, the total audited revenue was about RMB 464 million, including audit revenue of RMB 324 million, with 26 audit customers of listed companies.
At the end of 2020, the number of partners, certified public accountants and certified public accountants who signed the audit report of securities service business of China audit Zhonghuan was 185, 1537 and 794 respectively; In 2020, the total audited revenue was RMB 1.946 billion, including audit revenue of RMB 1.688 billion, with 179 audit customers of listed companies.
“When a listed company changes its appointment of an audit institution, it is particularly necessary to pay attention to the behavior of changing the appointment of a small Institute by a company with poor performance.” Ye Xiaojie believes that in theory, listed companies can be simply divided into high performance and poor performance companies, and accounting firms can be divided into large and small institutions. If the audit institution of a company with poor performance is changed from a small Institute to a large institute, the reputation effect of the large institute is conducive to ensuring its audit independence and the audit quality of the company.
reappear the case of changing the employment of audit institutions twice in a short time
It is worth noting that in 2021, there were two cases of changing audit institutions in a short time.
Changyuan Technology Group Ltd(600525) it was announced on December 11, 2021 that based on the actual situation of the company’s 2021 financial report audit workload and time arrangement, the company’s 2021 audit institution plans to be changed from Rongcheng Certified Public Accountants (special general partnership) (hereinafter referred to as “Rongcheng firm”) to Shanghui certified public Accountants (special general partnership) (hereinafter referred to as “Shanghui firm”).
On October 23, 2021, Changyuan Technology Group Ltd(600525) announced that Shanghai accounting firm had provided audit services for the company for three consecutive years and issued a standard unqualified audit report on the company’s 2020 financial report. Considering the company’s business development and future audit needs, Rongcheng firm is proposed to be appointed as the company’s audit institution in 2021.
Changyuan Technology Group Ltd(600525) in less than 2 months, the auditor of 2021 was re employed twice, As a result, the Shanghai Stock Exchange issued a letter asking them to explain respectively: “the specific reasons for the two changes of the audit institution in 2021 and whether there are major changes, whether there are major differences between the company and the two accounting firms on matters related to the audit of the annual report, and whether there is a situation of purchasing audit opinions.”
In response, Changyuan Technology Group Ltd(600525) replied to the inquiry letter, saying that it was mainly due to the impact of the epidemic that Rongcheng office was unable to complete the audit of the previous projects in accordance with the time node formulated in the original audit plan. The company is responsible for the frequent employment of audit institutions, but there is no case of purchasing audit opinions.
Frequent changes in the employment of audit institutions in the short term deserve attention. Previously, Shanghai New Culture Media Group Co.Ltd(300336) and Xinghui precision (now known as Guangdong Saca Precision Manufacturing Co.Ltd(300464) ) repeatedly changed the audit institution, and then Shanghai New Culture Media Group Co.Ltd(300336) 2020 financial report and Xinghui precision 2019 financial report issued the audit report with non-standard opinions.
Taking Shanghai New Culture Media Group Co.Ltd(300336) as an example, the company announced on October 23, 2020 that considering that Lixin Certified Public Accountants (special general partnership) has provided annual audit services for the company for many consecutive years, in order to maintain the continuous independence and objectivity of the company’s audit work and meet the needs of the company’s future business development, In 2020, the audit institution plans to change to Daxin Certified Public Accountants (special general partnership) (hereinafter referred to as “Daxin firm”).
On March 9, 2021, Shanghai New Culture Media Group Co.Ltd(300336) announced that due to the audit work arrangement between the company and Daxin firm, it is expected that the company’s 2020 audit work will not be completed within the time specified by the company, and the company’s 2020 audit institution plans to be changed from Daxin firm to zhongxinghua certified public Accountants (special general partnership) (hereinafter referred to as “zhongxinghua firm”).
At this time, it is only more than one month before Shanghai New Culture Media Group Co.Ltd(300336) the 2020 annual report is disclosed on April 29, 2021. After that, zhongxinghua office issued an unqualified audit report with significant uncertainties and highlights related to going concern for the financial report of Shanghai New Culture Media Group Co.Ltd(300336) 2020.
Ye Xiaojie said that when undertaking audit services, accounting firms need to strictly abide by the audit standards, maintain the independence of audit, and resolutely reject the possible purchase of audit opinions. When a listed company changes to an audit institution, it should also fully consider the rationality. If the act of changing employment by borrowing is to seek other interests, it will inevitably arouse the doubts of regulatory authorities and the public.
