In real cases, there are many clubs that have been punished to implement the "golden cicada shelling" technique in order to avoid punishment, and also let the severe punishment of the regulatory authorities hit the "cotton". Personally, I think this loophole must be closed.
When listed companies implement financial fraud, relevant accounting firms are often affected. Because of years of financial fraud Jin Tongling Dahua Stock Exchange, which provided audit services, was suspended from engaging in securities service business for six months by the regulatory authorities. In real cases, there are many clubs that have been punished to implement the "golden cicada shelling" technique in order to avoid punishment, and also let the severe punishment of the regulatory authorities hit the "cotton". Personally, I think this loophole must be closed.
The negative impact of the punishment of suspending the relevant business of an accounting firm is undoubtedly very large. In addition to the fact that listed companies whose contracts expire will not continue to employ them as annual review agencies, even listed companies within the contract period will often terminate their cooperation with them for the purpose of "avoiding suspicion". After the punishment of Dahua Institute was exposed, more than 50 listed companies have terminated their contracts with the Institute.
As early as last November, because of financial fraud for six consecutive years, Jin Tongling received the Notice of Administrative Punishment in Advance from Jiangsu Securities Regulatory Bureau. As the annual review institution during the period, it is not surprising that Dahua Institute will be punished. The agency is also well aware of this.
It is worth noting that in the process of 2023 annual report audit, there will be more than 70 new audit institutions among the clients of Dahua Institute. Among them, there are more than 50 listed companies of Beijing Dahua International and more than 10 listed companies of Shenzhen Dahua International. Moreover, there are many listed companies that have terminated their contracts with Dahua that have changed to Beijing Dahua International or Shenzhen Dahua International as the 2024 annual review institutions.
It has become normal for listed companies to change their annual audit institutions in the capital market. However, for example, Beijing Dahua International or Shenzhen Dahua International, their principals or audit teams come from Dahua Institute. Therefore, there are many voices in the market questioning that Beijing Dahua International or Shenzhen Dahua International is the "vest" of Dahua. Since these two annual audit institutions have undertaken many audit businesses of the former Dahua Institute, in a sense, they have weakened the punishment of relevant administrative penalties and reduced the regulatory deterrent, which is obviously not conducive to the healthy development of the industry.
In fact, there are many cases of accounting firms getting rid of their shell after being punished. For example, in the case of Green Earth's financial fraud, some of its auditors, Shenzhen Pengcheng Institute, joined Guofu Haohua Institute and Guangzhou Tianjian Institute after their securities service business license was revoked. Another example is that most of the teams of Zhonglei Institute, whose securities service business license was revoked due to the fraud case of Wanfu Biotech, went to Lyondell Institute. In addition, after the explosion of Kangde's new forgery case, the audit team of Ruihua Institute, its annual audit institution, left on a large scale, and the largest team was transferred to ShineWing. After the case of Zhujiang was exposed by Kangmei Pharmaceutical's annual audit organization, part of its audit team joined Guangdong SINong Institute. Wait, wait, wait, wait, wait.
Moreover, in some penalty clubs, where the audit team goes, some projects will follow. image New Capital So it is. Due to the punishment of Dahua, the original audit team was transferred to Shenzhen Dahua International, and New Guodu plans to hire Shenzhen Dahua International as the audit institution in 2024. It is also because of this that there are even some public calls from individual clubs to invite the audit team involved in fraud to join, which is really amazing.
If there is a problem in the club, it is obviously wrong to knock over a boat. Moreover, not all personnel or audit teams have violated the rules. For the audit team or personnel of the club, they also have the right to join other clubs or establish their own doors. However, the target should be the audit team and personnel who do not violate laws and regulations, and those who violate laws and regulations are another matter.
There is no doubt that the problems in the meeting can be solved due to the loopholes in the current regulatory mechanism. For example, in the case of Jin Tongling, although Dahua was punished by "five penalties for each violation" and suspended its securities service business for six months, the cost of violation was not low, the three signing accountants were all "punished" without any restrictions on their practice. Then, its joining in other clubs will not be affected.
In order to prevent the phenomenon of "golden cicada getting out of the shell" after being punished by the club, I suggest that, first, in addition to the club, partners, signing accountants, the executives in charge of risk control within the club and the principals of the club should bear the personal responsibility corresponding to their mistakes. Second, the punishment of individuals should not only focus on fines. For cases with bad nature and extremely bad influence, the qualification of responsible personnel shall also be subject to necessary restrictions. In this way, whether it is the club or the responsible person, the difficulty of "getting rid of the golden cicada" will greatly increase.
(About the author of this article: Independent financial writers have published hundreds of articles in three major securities newspapers and other media)
