Audit probe blocks fundraising
The fundraising plans of nearly 60 companies have been affected by an investigation into local audit firm Ruihua.
Ruihua Certified Public Accountants, the second largest accounting auditor in China, was placed under investigation by the China Securities Regulatory Commission on July 5 for allegedly falsifying information.
As of July 29, refinancing projects of 24 listed companies have been suspended and 33 initial public offerings (including four queuing up for IPOs on the new sci-tech board) have been halted due to the investigation.
AI data resource provider Speechocean, which was applying to list on the new SSE STAR Market, withdrew its application on July 26.
According to Ruihua's official website, the auditor was providing services to 316 companies listed on the A-share markets, accounting for nearly 10 percent of the total number of A-share listed firms. It posted revenue of 2.9 billion yuan (US$421.6 million) in 2018, according to the Chinese Institute of Certified Public Accountants.
Since July, six companies have canceled contracts with Ruihua and have signed with other accounting firms.
Ruihua was first embroiled in scandal involving large amounts of fake data, including fake cash, on its clients’ books after the CSRC found that Kangde Xin Composite Material Group, a company audited by Ruihua, had inflated its cash position, defaulting on a relatively small amount of debt despite huge cash balances on its balance sheet.