China fines Beijing office of Deloitte $30.8 mn over audit failings

The Beijing office of Deloitte Touche Tohmatsu has been fined USD 30.8 million for failing to adequately audit a Chinese state-owned asset management company whose former head was sentenced to death on corruption charges.

The office also was ordered to suspend operations for three months for mishandling audit and other work at China Huarong Asset Management Co. in 2014-19, the Ministry of Finance announced Friday.

Deloitte was fined 211.9 million yuan (USD 30.8 million), the ministry said. It said Huarong was fined a total of 800,000 yuan (USD 116,000) and 13 employees were fined a total of 250,000 yuan (USD 36,000) for their role in faulty audits.

Huarong is one of four entities created in the 1990s to buy nonperforming loans from state-owned banks. They expanded into banking, insurance, real estate finance and other fields.

Huarong's former head, Lai Xiaomin, was sentenced to death on 2021 on charges of embezzlement and taking bribes in exchange for investments, construction contracts and jobs.

Regulators concluded Deloitte failed to pay close enough attention to management activities, Huarong's assets and compliance matters, the Ministry of Finance said.

In a statement issued to Chinese media, Deloitte said it accepted the punishment and expressed regret regulators found aspects of its audit failed to meet standards.