mangrovesnapper| Reveal Dahua Certified Public Accountants '"golden cicada shell" technique! "Lao Yan split up" or "cunning rabbit three caves"

Does the history of "golden cicada out of shell" repeat itself?

It has been more than a week since Jiangsu Securities Regulatory Bureau and Shenzhen Stock Exchange punished, Dahua accounting firm (hereinafter referred to as "Dahua Institute") has not yet updated the progress of the projects queued up for examination and approval on the exchange. However, there have been rumors in recent days that the projects under trial involving Dahua Institute may be required to be dealt with in a strict manner, that is, re-audit, not in the form of a review report.

Brokerage Chinese reporters from multiple IPO project teamsMangrovesnapperIt has been learned that some relevant IPO enterprises do say that they want to change the accounting office and re-audit, but some project teams say that the situation is unknown.

If the audit institution is changed, whether Beijing Dahua International Accounting firm (hereinafter referred to as "Beijing Dahua International") and Shenzhen Dahua International Accounting firm (hereinafter referred to as "Shenzhen Dahua International") are the beneficiaries has attracted much attention. This is because the above two institutions have not only absorbed a large number of people from Dahua in the past year, but also separated a number of annual report audit projects of listed companies from Dahua. In addition, according to the brokerage Chinese reporter's inspection of the Shenzhen office site, Shenzhen Dahua International and Dahua Shenzhen Branch are located on the adjacent floor of the same office building, and the appearance of the front desk and office space are similar.

The industry questioned that Beijing Dahua International and Shenzhen Dahua International were "vests" prepared by Dahua Institute for a long time, and worried that in the history of the capital market, the stage of "getting out of the shell" of accounting firms might happen again.

Some experts, scholars and lawyers told Chinese reporters of securities firms that they should not only respect the right of accountants to be legally transferred, but also implement the responsibility and punishment of counterfeiting cases to individuals. In addition to the relevant project signature accountants, the internal personnel in charge of risk control and the relevant partners of the accounting firm shall bear the personal responsibility corresponding to their faults.

There is a "exchange" of the IPO project.

Recently, there are rumors in the IPO market that as Dahua was suspended from securities service business for six months because of the Jin Tongling (300091) fraud case, its IPO projects and refinancing projects queued at the exchange may be required to reissue audit reports, not in the form of review.

It is reported that according to the Exchange's rules on the examination of Stock issuance and listing, when the audit of IPO enterprises is suspended because the audit institutions are suspended from securities service business, if IPO enterprises want to "change exchanges", the new audit institutions should complete due diligence within 3 months from the date of suspension of the audit, re-issue relevant documents, review the documents issued by the original audit institutions, issue review opinions, and explain the differences. If it is not replaced, the original audit institution shall issue a review report.

An investment banker commented on the rumors that there was a real need to change the accounting firm and re-audit. The person has an IPO project under review, and the auditor is Dahua Institute.

Some people on the project team said they were not sure yet. An intermediary has an IPO project involving Dahua Institute, which has been queued up for review on the Shanghai Stock Exchange. The person said that the project will be affected by Dahua, but the exact impact is not clear. Another brokerage investment bank said that it had not yet received specific regulatory requirements, and its team had an IPO project involving Dahua Institute, which had been declared to the Beijing Stock Exchange.

Data show that as of May 21, a total of 37 IPO projects are under review by Dahua, including 18 in Shenzhen, 12 in Shanghai and 7 on the North Stock Exchange. According to the official website of the exchange, the vast majority of the above IPO projects have long been in a "suspended" state due to the issuer's updating of financial report data, and only one order has passed the examination and approval of the listing committee; another 1 single gem IPO project was terminated on May 21, and it is uncertain whether the reason for withdrawing materials is related to Dahua Institute.

In terms of refinancing, Dahua has reviewed a total of 10 projects, including 4 in Shenzhen, 5 in Shanghai and 1 on the North Stock Exchange. Two of these projects have made rapid progress and have entered the link of "submitting registration".

A person from an intermediary agency in the field of securities services in Guangzhou analyzed to the reporter that IPO enterprises are not necessarily willing to wait for Dahua to eliminate the negative impact. At present, other accounting firms in the market are "eyeing covetously" and plan to poach the projects of Dahua. On the other hand, the partners of Dahua also appear "Lao Yan separated."

"Lao Yan Flying apart" or "Cunny Rabbit three Grottoes"

Once the above-mentioned projects under review involve "exchange" re-audit, whether Beijing Dahua International and Shenzhen Dahua International are "takers" has attracted much attention from the market.

Data show that in the past half a year, many annual report audit projects of Dahua Institute have gone to Dahua International in Beijing and Dahua International in Shenzhen.

According to the statistics of Chinese reporters of securities firms combined with Wind data, in the financial report audit business of listed companies in 2023, Beijing Dahua International "separated" 56 items from Dahua Institute, involving a total audit fee of 6433.Mangrovesnapper.580,000 yuan; Shenzhen Dahua International "split" 15 projects, involving a total audit fee of 21.296 million yuan. The rehiring of audit institutions for related projects all took place in December 2023.

If we take the financial report audit fees of Dahua listed companies in 2022 as a simple calculation, the audit fees earned by Dahua in that year is about 571 million yuan. That means that Beijing Dahua International and Shenzhen Dahua International together "split" about 15% of the "cake" of Dahua in 2023.

On May 15, the new capital (300130) also announced that it would change the audit institution to Shenzhen Dahua International in 2024, which was originally employed by Dahua Institute. The reason for this change is that on the one hand, Dahua Institute was fined, on the other hand, part of the original audit team served by the company has been transferred to Shenzhen Dahua International.

The above two accounting offices did not complete the filing and registration of securities services business until November 2022, and they are actually "recruits" in the capital market. Why did the "sudden rise of a new force" undertake a large number of business from Dahua Institute, one of the "eight domestic firms" in 2023? it has become the focus of market attention.

Tianyan check information shows that Beijing Dahua International and Shenzhen Dahua International were established in 2008 and 2005 respectively. In more than a decade of development, both have used names and experienced many partner changes. Until the second half of 2022, the two accounting firms showed basically the same pace of development.

Specifically, in October 2022, Shenzhen Tianpeng Accounting firm changed its name to Shenzhen Dahua International, moved its office to the same office building as Dahua Shenzhen Branch, and completed the registration of securities services business in November. In the same month, the industrial and commercial registration of Beijing Rong Audit Accounting firm changed its name to Beijing Dahua International, and also completed the filing of securities services business. In September 2023, both Shenzhen Dahua International and Beijing Dahua International changed their "official declaration" system, that is, from a general partnership to a special general partnership.

The rhythm of recruiting personnel is also basically synchronized. According to the public information of the Multi-place Investment Association, all 46 certified public accountants of Dahua Institute in Shenzhen joined Shenzhen Dahua International in August 2023. In September, Beijing Dahua International welcomed 46 certified public accountants from Dahua Institute as a whole.

At present, the chief accountant / chief partner of Shenzhen Dahua International is Zhang Jiandong, who used to practice in the Shenzhen branch of Dahua Institute and transferred to the above-mentioned Shenzhen Tianpeng Accounting Office in February 2022. From then on, all the above-mentioned "transformational" changes have taken place. The change in Beijing Dahua International began when Wang Lijun and Cui Huiqiang, who also worked at Dahua Institute, joined in the fourth quarter of 2022. The current chief accountant / chief partner of Beijing Dahua International is Yang Xiong, who previously served as executive affairs and business management partner and audit business managing partner of Dahua Institute. he joined Beijing Dahua International in November 2023.

Another feature of the close international relationship between Dahua Institute, Beijing Dahua International and Shenzhen Dahua International is that some of the branch offices are close to each other. Take Shenzhen as an example, according to the registration information of Dahua Institute Shenzhen Branch and Shenzhen Dahua International China injection Association, the office address of the former is on the 11th to 14th floor of the Radio and Television Financial Center, while the latter is on the 14th floor.

Brokerage Chinese reporters found that, in fact, Dahua Institute Shenzhen branch only occupies the 12th floor, the office area is smaller than the registration information of the Association to only one floor. However, the office space of Shenzhen Dahua International has greatly expanded, accounting for the 11th floor, 13th to 14th floor, and some of the floors were originally offices of Dahua Shenzhen Branch. From the appearance of the front desk, the logos of the two accounting firms are very similar, with the words "Dahua International".

The above situation is not an isolated case. According to the registration information of China injection Association, Beijing Dahua International Jiangxi Branch and Dahua Jiangxi Branch are located on the fifth floor of Nanchang Fengyuan Convention and Exhibition Center. Similarly, the Guizhou branches of the above two offices are also located on the 13th floor of the commercial office building in Huicheng, Jinyang, Guiyang.

Precisely because the personnel and business relations of Beijing Dahua International and Shenzhen Dahua International basically come from Dahua Institute, whether the three accounting firms are "the same" is a hot topic in the industry.

An insider of Dahua Institute said that they are legally independent and not the same organization, but most of the partners and employees of Dahua International come from Dahua Institute.

According to the public information of China injection Association, Beijing injection Association, and Shenzhen injection Association, Chinese reporters of securities firms found that the current responsible persons of Beijing Dahua International's Jiangsu branch, Jiangxi branch, Shenzhen branch and Sichuan branch (in turn, Sheng Qing, Guan Dingcai, Lin Wanyu, Li Chunyu), it was in September 2023 that they were transferred from the corresponding local branches of Dahua. Up to this year, certified public accountants of Dahua Institute have been transferred to the above two institutions one after another.

Scholars and lawyers talk about the standard of law enforcement

What makes the market question is whether Dahua's corresponding penalties will be reduced to "a piece of paper" as partners and accountants join other institutions, and whether Beijing Dahua International and Shenzhen Dahua International will be the "vests" already prepared by Dahua.

A Chinese reporter from a securities firm noted that at a time when Shenzhen Dahua International and Beijing Dahua International changed their names, put on record, relocated, and absorbed certified public accountants of Dahua Institute from 2022 to 2023, Dahua Institute was being punished for the fraud of two listed companies.

In June 2022, the CSRC considered that Dahua Dongfang Jinyu (600086) project had not done its duty diligently, that there were false records in the audit report of the 2017 financial statements, that the risk identification and assessment procedures were not in place, that there were major defects in the internal control testing procedures, and that there were major defects in the substantive audit procedures related to procurement, sales and inventory. In March 2023, Dahua Institute was punished again for the Zhangzi Island (002069) project, and the CSRC pointed out that there were false records in its 2016 annual audit report of the Zhangzi Island Group.

Now, Dahua is once again caught in the whirlpool of fraud cases of listed companies. Jin Tongling's fraud has shocked the supervision for six consecutive years, and the Jiangsu Securities Regulatory Bureau suspended Dahua's securities service business for six months. The Shenzhen Stock Exchange gave it a penalty of not accepting the relevant documents of its securities business and securities service business for six months, and the punishment was subject to regulatory mutual recognition on the Shanghai Stock Exchange and the North Stock Exchange.

The impact of the above penalties on the business of Dahua Institute should not be underestimated. Since May, in order to retain customers and allay their concerns, Dahua Institute has explained that this administrative penalty will not affect its business of reporting and auditing listed companies in 2024. Industry insiders question whether Beijing Dahua International and Shenzhen Dahua International are the "back hands" prepared by Dahua to reduce the impact of punishment and normal business development.

Reviewing the history of the capital market, after the accountant is punished, the accountant team will change doors and continue to work in another firm, which is regarded by the market as a "golden cicada".

For example, after Shenzhen Pengcheng Accounting firm, an auditor of Green Land, was revoked of its securities service business license, some people joined Guofu Horwath Accounting firm and Guangzhou Tianjian Accounting firm. For example, after the fraud case of Wanfu Science was exposed, most of the teams of Zhonglei Accounting firm, which had its securities service license revoked, defected to Lianda Accounting firm.

To this end, a number of lawyers interviewed believe that the punishment of accounting firms and individuals should not only deprive the securities market access qualification, the relevant managing partners should also be punished accordingly.

Wang Zhibin, a lawyer at Shanghai Minglun Law firm, said in an interview with a Chinese reporter from a securities firm that punishment at the accounting firm level is necessary, but what is more important is to "penetrate" the legal liability to the individual. The signed accountant, the person in charge of risk control within the accounting firm and the head of the accounting firm should all bear personal responsibility corresponding to their fault.

Xu Feng, director of Shanghai Jiucheng Law firm, said that the behavior of accounting firms to "change their vests" to undertake business can only be said to be a question of how to regulate in the future and to what extent the joint and several liability of the partners. According to the current law, certified public accountants should be transferred legally, but whether there will be stricter management of relevant accounting firms in the future is worthy of attention.

A partner of a law firm in Guangdong said that if an accountant at fault "changes his vest" to practice, it is unreasonable and illegal, in essence, it is a lack of law enforcement. If it is an unrelated accountant to start a new stove, it is not only their legitimate professional rights and interests, but also, to some extent, a protection of the previous client-related audit business. Therefore, the crux of the problem is not whether accountants should be transferred and take away the original projects, but should be strictly distinguished and effective restrictions should be imposed on accountants who can no longer practice.

Liu Junhai, a professor at the Law School of Renmin University of China who participated in the revision of the Partnership Enterprise Law, recently believed in an interview with a Chinese reporter from a brokerage firm that individuals should be punished from the perspective of administrative penalties for the involvement of accounting firms in related financial fraud. He explained that under the corporate structure of a special general partnership, partners who are not at fault for financial fraud have limited liability, and partners who are responsible have unlimited liability. "If the responsibility lies with the person, it will be useless for an accountant to change his firm and he will still be unable to practice."

When talking about how to ensure the regulatory standards and strengthen the management responsibilities of partners in accounting firms, Liu Junhai believes that it is necessary to address both the symptoms and root causes and manage them from the source.

He gave four suggestions. One is to improve the ethics and professional skills of the accounting industry, promote the spirit of craftsmanship, and not be fooled by audit objects. The second is to completely eliminate the current unfair competition atmosphere in accounting offices, especially the "price war" that does not mention the bottom line, which will further cause the problem of insufficient sense of responsibility among employees. The third is to regulate and consolidate the legal responsibilities of the real evil people such as the actual controllers of listed companies and the "key minority" of directors and supervisors, including administrative penalties for civil compensation and criminal liability and credit liability. Fourth, accounting offices must put themselves in a correct position and recognize that the beneficiaries and principals of the accounting office who are honest, trustworthy, diligent and responsible should be the broad masses of public investors.

This article was first published on Weixin Official Accounts: Broker China. The content of the article belongs to the author's personal opinion and does not represent the position of Hexun.com. Investors should act accordingly and bear the risks themselves.

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