Deloitte Touche Tohmatsu and one of its partners, Lee Po Chi, have been reprimanded and fined by the Hong Kong Institute of Certified Public Accountants (HKICPA) for failures in the audit of investment company Culturecom Holdings.
Deloitte audited the consolidated financial statements of this company, which is listed in Hong Kong, and its subsidiaries (The Group) for each of the years ended 31 March 2013 to 2016. Lee was the engagement partner in these audits.
The financial statements for 2014 and 2015 included an impairment loss of HK$29.6m (US$3.8m) on the Group’s investment in a listed company. HKICPA found this loss was inappropriately recorded as the market value of the investee’s shares was greater than their carrying amount in the two years. As a result the Group’s net assets were understated in those financial statements. In 2016 the impairment loss was retrospectively reversed.
The HKICPA said that in order to resolve its complaint, both Lee and Deloitte were to pay an administrative penalty of HK$50,000 and jointly pay costs of HK$10,000, and be reprimanded.
