Quick News Network August 30th (Reporters Chen Junlan Zhao Xinrui) On August 29th, the Shandong Securities Regulatory Bureau disclosed the penalties imposed on Tianjianu Accounting Firm. The penalties were the result of the Shandong Securities Regulatory Bureau's on-site inspection of the 2022 financial statement audit project of Luoxin Pharmaceuticals, where it was found that Tianjianu Accounting Firm had multiple practice issues during the audit process.

The penalty shows that Tianjianu Accounting Firm had ten violations in the practice process of the 2022 financial statement audit project of Luoxin Pharmaceuticals:

First, the independence management is inadequate.Some project team members did not sign independence declarations.

Second, the risk assessment procedures are inadequate.They did not fully consider the significant losses and abnormal fluctuations in pre-tax profits of the audited unit in 2022, and did not prudently determine the level of importance.

Third, the internal control and control testing are inadequate.The effectiveness of the design of some non-controlling parts has not been evaluated; the testing and execution of some key control processes, key control points, and control tests are not in place.

The execution of the letter verification procedure is not in compliance.The execution of the letter address information verification procedure is not in place, and the reasons for some non-compliant replies are not verified and further audit procedures are not executed. The reasons for some customers not replying are not verified and substitute testing is not performed. Some substitute testing is not in place. After confirming the reply, some receivables were audited and adjusted again according to the actual return situation, but the verification procedures were not re-implemented. In the audit of sales expenses, only a letter was sent to the promotion agent accounting company without fully considering the reasonableness of the confirmation objects.

Inventory audit is not in place.Insufficient attention has been paid to the abnormal provision for inventory depreciation and reasonable explanations have not been provided. The verification procedures from original vouchers to inventory details in the warehousing and delivery process were not executed during the testing. The execution of analytical procedures, such as abnormal fluctuations in production, was not in place. The signed inventory count sheets and inventory reports for some entities were not obtained and verified, and the sampled variances were not adequately verified.

The audit of accounts receivable is not in place.In the examination of bad debt provisions, insufficient attention has been paid to the impact of the credit risk status of some customers on the estimation results and further audit procedures were not executed. Analytical procedures were not performed on some indicators of accounts receivable according to the audit plan. Insufficient attention has been paid to whether the fair value of accounts receivable with performance commitments by the audited entity has changed, and the forecast of the completion of performance commitments by the company has not been obtained and verified.

Incomplete records of the verification procedures implemented for abnormal matters related to equity transactions.

One is that the audit of revenue is not in place.Second, the sampling amount standards before and after the revenue cutoff test are different and no reasonable explanation was given.

Nine is that the audit handling of selling expenses is not in place.Second, insufficient attention was paid to the concentrated booking of direct sales team selling expenses in June and December by the audited entity, and the accuracy of the relevant accounting treatment was not evaluated.

Ten is that the audit working papers did not fully record the follow-up implementation of the internal control review findings, and the reviewers did not pay attention to it.

Shandong Securities Regulatory Bureau has decided to issue a warning letter to Tianjian Accounting Firm, Zhang Jianhua, and Fang Lifang in accordance with relevant laws and regulations, and record it in the integrity database of the securities and futures market. The relevant parties involved are required to take it as a warning, take timely measures to strengthen internal management, further improve the quality of practice, and submit a written report within 15 working days from the date of receiving this decision.

86 companies are under review.

As a leader in the IPO auditing field, Tianjian Accounting Firm faces uncertainty in maintaining its industry-leading position after receiving consecutive fines. According to Yidong data, as of August 30th, Tianjian Accounting Firm has 53 IPO projects under review, ranking second among accounting firms with IPO projects under review. In addition, there are 30 refinancing projects and 3 asset restructuring projects under review.

In terms of IPO projects, the ChiNext board of the Shenzhen Stock Exchange has the most projects under review, with a total of 15, followed by the main board of the Shanghai Stock Exchange with 13, the BSE with 12, the main board of the Shenzhen Stock Exchange with 7, and the STAR Market of the Shanghai Stock Exchange with 6. Among them, three projects on the BSE, namely Ligong Shares, Shengfulai, and Qianxilong Fiber, are currently in a suspended state.

In terms of refinancing projects, the main board of the Shanghai Stock Exchange has the most projects under review, with a total of 11, followed by the STAR Market of the Shanghai Stock Exchange with 8, the main board and ChiNext board of the Shenzhen Stock Exchange with 5 each, and the BSE with 1. The refinancing project of Koren Zhikong, a project on the BSE, is currently also in a suspended state.

There are three companies involved in asset restructuring, namely Infotmic Co.,Ltd, Robotechnik Intelligent Technology, and Huaihe Energy.

Tianjian Accounting Firm has received a total of 10 fines this year, most of which are double fines.

In addition to the recent fines, in fact, Tianjian Accounting Firm has been penalized by regulatory authorities multiple times this year. According to Yidong data, it has received a total of 10 fines.

It is worth noting that in June, the Ministry of Finance imposed heavy penalties on overseas accounting firms for violations. During his tenure as Deputy General Manager and Partner of Tianjian Accounting Firm's Guangdong branch, Zhang Yunhe handled cross-border auditing business privately, and illegally retained and took away audit workpapers. In accordance with relevant regulations, the Ministry of Finance issued a warning and imposed a fine of 0.03 million yuan. At the same time, the Chinese Institute of Certified Public Accountants publicly condemned Zhang Yunhe, and revoked the "30 Years of Honest Practice of a Certified Public Accountant" honorary certificate that he received in November 2023.

On June 6th, the Shanghai Stock Exchange issued a regulatory measures decision to Tianjian Accounting Firm. As the reporting accountant for the Lixuan Sports project, Tianjian Accounting Firm failed to fulfill its duty of diligent review regarding the coincidence of the flow of funds between related companies and suppliers, and failed to fully perform detailed revenue testing procedures. The accounting firm and two relevant individuals were given regulatory warnings.

In May, Tianjian Accounting Firm received a total of 3 fines from the Zhejiang Securities Regulatory Bureau, involving 4 practitioners who were punished. All of them were related to Tianjian Accounting Firm's provision of audit services for the annual financial statements of Zhejiang Juli Culture from 2016 to 2018, and the issuance of audit reports. After investigation, it was found that there were false records in the annual reports of Zhejiang Juli Culture from 2016 to 2018, and Tianjian Accounting Firm did not fulfill its responsibilities diligently during the audit process of the annual financial statements.

From a comprehensive perspective of the fines, Ge Xu, Wang Mingwei, and Ji Jiajia, the signing certified public accountants, were directly responsible for the operations of Tianjian Accounting Firm from 2016 to 2018; while Song Huijuan, the signing certified public accountant, was directly responsible for the above-mentioned violations. According to relevant regulations, the Zhejiang Securities Regulatory Bureau issued warnings to the 4 individuals, and Ge Xu, Wang Mingwei, and Ji Jiajia were fined 0.05 million yuan each, while Song Huijuan was fined 0.08 million yuan.

On April 30, Tianjian Accounting Firm was ordered to correct its failure to fulfill its responsibilities diligently during the audit of the annual financial statements of Zhejiang Juli Culture from 2016 to 2018 by the Zhejiang Securities Regulatory Bureau. In addition, a total of 2.5943 million yuan of business income was confiscated and a fine of 2.5943 million yuan was imposed.

On the same day, Tianjian Accounting Firm received another fine from the Zhejiang Securities Regulatory Bureau. In the audit services provided for Zhuojin Stock's 2021 financial statements, it constituted the behavior described in Article 213, Paragraph 3 of the Securities Law, where the securities service agency did not fulfill its responsibilities diligently, its documents contained false records, misleading statements, or significant omissions. Mao Xiaodong and Huang Jinhong, the signing certified public accountants, were directly responsible for the aforementioned violations. The Zhejiang Securities Regulatory Bureau ordered Tianjian Accounting Firm to correct the violations, confiscated a total of 0.6604 million yuan of business income, and imposed a fine of 0.6604 million yuan. Mao Xiaodong and Huang Jinhong were both given warnings and fined 0.2 million yuan each.

On April 25, Tianjian Accounting Firm received warning letters and their names were recorded in the integrity records of the securities and futures market for the improper execution of audit procedures for Huayi Electrical's 2017 and 2019 annual revenue audits. Lv Yingqun, Geng Zhen, and Huang Fu were the signing certified public accountants.

On April 19, Tianjian Accounting Firm and its signing certified public accountants Zhang Jianhua, Fang Lifang, Li Lian, and Su Xing received regulatory letters from the Shenzhen Stock Exchange due to various issues, such as improper execution of audit procedures and information system audit procedures, in the audit of the 2022 financial statements of Luoxin Pharmaceuticals and Maxvision Technology.

From the situation of the 10 fines, not only in project audits, most of the fines involve previous financial statement audit services, highlighting the urgent need for Tianjian Accounting Firm to strengthen internal management and further improve the quality of its practices.

Accounting firm issues have been frequent, with 164 fines received so far this year.

Since the beginning of this year, with the continuous release of strict regulatory signals, the number of penalties for intermediary institutions and practitioners has increased. According to Yidong, as of now, accounting firms and accountants have received a total of 164 fines, involving 34 accounting firms.

Since August, including Beijing Dongshen Accounting Firm, Tianzhi International Accounting Firm, ShineWing & Co. Accounting Firm, Teng Hong Accounting Firm, GreaterChina Accountants & Auditors, Zhongxi Accountants & Auditors, DHW International Accounting Firm, ShangHui Accounting Firm, and TianJian Accounting Firm have all been penalized, totaling 14 fines. The majority of violations were related to audit procedural deficiencies.

In addition, in 2024, the CSRC has temporarily suspended the securities business of three accounting firms for 6 months, involving Zhongtian Huamao, GreaterChina, and Tianzhi International Accounting Firm. The frequent issues with accounting firms and the high number of regulatory penalties indicate that future regulation of intermediary institutions' illegal activities will continue to maintain high pressure and increase the cost of illegal activities. 'Without teeth' or 'thorns' may become the norm.