Finance

China orders Deloitte to investigate whistleblower allegations

China’s government has ordered Big Four accounting firm Deloitte to conduct an internal investigation after an anonymous whistleblower alleged serious violations in relation to audits carried out by its Beijing office.

A 55-page PowerPoint presentation, purportedly compiled by a Deloitte employee and circulated on social media, cited alleged auditing incidents between 2016 and 2017 involving five clients, some of which are listed on the New York and Hong Kong stock exchanges.

China’s Ministry of Finance said in a statement that it “attached great importance” to the whistleblower report and that it had called a meeting with Deloitte’s management.

The report includes allegations that auditors used Photoshop to change inconsistencies in financial statements, fabricated checks on numbers when carrying out audit procedures, and that one audit partner accepted a voucher worth “tens of thousands of yuan” to help a client cover up financial problems. The contents of the document were first reported by Chinese financial news site Caixin. The Financial Times has not been able to independently verify the authenticity of the whistleblower report.

Deloitte said in a statement that it had “been made aware of allegations that are currently circulating on social media”.

“Many of these allegations were previously reported by a member of our staff through the firm’s own internal channels and subject of investigative procedures,” the company added. “Nothing has been found to call into question the sufficiency of our audit evidence supporting our reports. Any further allegations of which we are made aware will be investigated.”

In the report, the author — who claimed to be an employee of the international accountancy group — alleged: “The behaviour of Deloitte’s toleration, connivance, shielding and concealment of the personnels involved in the audit quality problems has seriously damaged the order of domestic and foreign financial markets, affected the quality of audit reports, and brought huge risks to the investment decisions of domestic and foreign expected users of the reports.”

The author claimed that they had “communicated with Deloitte management . . . more than 30 times for two years” about the concerns but the firm had “not properly dealt with” the matters since 2018.

China’s Ministry of Finance said it would attempt to improve the quality of company audits in 2021, including plans to “rectify outstanding problems” in the accounting industry and “enforce strict law enforcement and strict supervision” over it.

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