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March 21, 2012

Deloitte quits as auditor of China’s Daqing, Boshiwa

Deloitte has resigned as auditor of Hong Kong-listed milk formula products maker Daqing Dairy Holdings only days after quitting children’s clothing manufacturer Boshiwa International Holdings.

Daqing Dairy Holding shares have been suspended after falling 17% in the three days trading prior to its suspension.

Due to client confidentiality, Deloitte said it could not comment further on the reasons behind its resignation.

Last week, Deloitte quit Chinese Boshiwa, which manufactures Harry Potter merchandise, because the firm was not satisfied with Boshiwa’s response to questions about certain transactions.

An issue Deloitte cited was the “existence and commercial substance of recorded prepayments of CYN392 million with a supplier”.

Deloitte’s resignation knocked Boshiwa’s share price down 42% before trading was suspended, placing serious doubts over its future viability.

Deloitte has had several problems auditing Chinese companies in the past years.

Last May, Deloitte was forced to quit as auditor of US-listed Chinese technology company Longtop Financial Technologies.

Following the resignation, Deloitte was in the midst of a legal dispute as the US Securities and Exchange Commission (SEC) attempted to force Deloitte’s Chinese firm to pass over audit documentation but the firm was blocked from doing so by Chinese laws.

Paul Gillis, a visiting professor of accounting at Peking University’s Guanghua School of Management and an expert on the Chinese audit profession warned more resignations could occur in April when Chinese companies listed in the US are due to file their annual report on Form 20F.

 

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