Following the investigation of the Chinese audit firm Ruihua, the country’s second-largest accounting auditor, current financial undertaking of certain companies has been put on hold.
On July 5, Ruihua was placed under investigation by the China Securities Regulatory Commission for allegedly falsifying information.
Refinancing projects of approximately 24 listed companies have been suspended and around 33 initial public offerings, including four queueing up for IPOs on the new sci-tech board, have been halted due to the investigation.
Speechocean, an AI data resource provider was applying to list on the new Shanghai Stock Exchange STAR Market, withdrew its application on July 26. Ruihua’s official website reveals that 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.
According to the Chinese Institute of Certified Public Accountants, it posted a revenue of 2.9 billion yuan (US$421.6 million) in 2018. Due to the current turn of events, six companies have cut ties with Ruihua and have opted to sign with other accounting firms.
Ruihua was first involved in scandal concerning large amount of fraudulent transactions on its clients’ books. It has reportedly inflated Kang de Xin Composite Material Group’s cash position and disclosed a relatively small amount of debt despite huge cash balances on its balance sheet.
