KPMG resolves legal claim after failing to find fraud in Chinese group

KPMG will pay HK $ 650 million (US $ 84 million) to resolve the legal claim because the Chinese timber company was unable to identify the fraud.

A China Forestry liquidator claimed that KPMG was negligent because it failed to detect materially false accounting by its management prior to its listing in 2009.

KPMG settled the proceedings at the end of last month, the night before the 10-week trial in Hong Kong, according to two people familiar with the matter.

The proceedings against KPMG are the latest case to scrutinize audits of Chinese companies listed outside the mainland.

Big four accounting firms Face new pressure Deliver audits of New York-listed Chinese customers for inspection from US regulators. China prohibits foreign authorities from viewing many of the confidential documents, including audit files.

Earlier this month, after a blunder around Vehicle dispatch app DidiChina has warned that US law requiring US-listed Chinese companies to submit to US audits could leak important data across national borders.

China Forestry raised $ 216 million when it went public in Hong Kong, but was suspended more than a year later after auditors reported accounting fraud. Backed by international investors such as the Carlyle and Partners Group, the company was delisted in 2017.

2019 Hong Kong Securities and Futures Commission (SFC) Fine four international banks — UBS, Standard Chartered, Morgan Stanley, Bank of America Merrill Lynch — A total of $ 100 million for due diligence failures in a series of IPOs including China Forestry.

UBS, which sponsored the listing, was banned from major IPOs in Hong Kong for a year. After a series of scandals at newly listed companies, it was the most difficult action taken by local regulators to prevent poor listings.

A China Forestry clearer said during a pre-IPO audit that KPMG could not detect that executives had tampered with the company’s assets and revenues by submitting forged bank statements and customer records. Insisted. They also claimed that some KPMG staff prepared audit documents during the course of their work.

KPMG denied the allegations and claimed that it had failed to detect the fraud. We did not respond to requests for comment on the legal settlement. China Forestry liquidator Borrelli Walsh and their lawyer Lippmann Crow also declined to comment.

According to one person familiar with the matter, the agreed settlement is about half of the HK $ 1.3 billion loss claimed by the liquidator.

The SFC fines for the four banks in 2019 were seen as a milestone in the enforcement of regulations on IPOs in Hong Kong. Regulators struggle to balance the attractive destinations of China’s listing, which accounts for more than 80% of the market value of the Hong Kong Stock Exchange, with fraud crackdowns and false alarms by some companies. Was considered to be. Cohort of the same company.

KPMG is also facing a legal battle over alleged audit negligence against former US-listed China Medical Technologies liquidators. A civil suit against KPMG will be tried in Hong Kong next year.

KPMG resolves legal claim after failing to find fraud in Chinese group

Source link KPMG resolves legal claim after failing to find fraud in Chinese group

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