Hong Kong’s audit watchdog has imposed a fine of HK$1.9m ( $245,000) on accounting firm Deloitte Touche Tohmatsu and two of its partners for audit deficiencies.  

The fines by the Accounting and Financial Reporting Council (AFRC) relate to the audits of two former listed companies over the period from 2011 to 2013. 

The AFRC, with assistance from the mainland’s Ministry of Finance (MOF), has concluded its first batch of disciplinary cases.  

Additionally, two partners at the firm, Samuel Wong Tin-chak and Mak Chi-lung, have been ordered to pay HK$416,000 and HK$336,000, respectively.  

Both partners, as well as the firm, have been reprimanded by the regulator. 

The AFRC identified multiple audit deficiencies, particularly in revenue recognition, which led to the failure to identify related misstatements.  

The individuals and firm involved accepted their breaches and proactively engaged in settlement negotiations, ultimately reaching an early settlement with the AFRC. 

The Tianhe Group’s core business involved the manufacturing and sale of fine chemical products.  

Deloitte and Wong were responsible for auditing the financial information of the Tianhe Group for the financial years 2011, 2012, and 2013, as part of the company’s 2014 IPO on the Main Board of the Hong Kong Stock Exchange.  

The AFRC highlighted that revenue was a significant risk area and that there was a potential risk of material misstatement due to fraud. 

The AFRC’s findings indicated that the reporting accountants failed to properly evaluate internal controls over the revenue cycle and did not obtain sufficient appropriate audit evidence regarding their operating effectiveness. 

As for the Sound Global Group, which specialised in turnkey water and wastewater treatment, Deloitte and Mak audited the financial information for the years 2012 and 2013.  

The auditors had identified risks of material misstatement in relation to revenue and bank balances for both years.  

The AFRC found multiple deficiencies in their work, particularly concerning revenue from turnkey services and sales of equipment, as well as external confirmations relating to bank balances and trade receivables. 

AFRC CEO Janey Lai said: “The successful completion of these disciplinary cases attests to the effectiveness of the Memorandum of Understanding signed between the MoF and AFRC in 2019 in strengthening public trust in financial reporting and investor confidence.  

In July 2025, The UK’s Financial Reporting Council (FRC) launched an investigation into Deloitte’s audits of Glencore, the mining giant.