Hunan Ordnance Tendering Accounting Office: If the securities business is suspended, it will have to pay compensation. The response said that it does not want to affect the company's IPO
2024-08-12
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According to the Red Star Capital Bureau on August 12, as rumors of the suspension of securities services business of Tianzhi International Accounting Firm (Special General Partnership) (hereinafter referred to as "Tianzhi International") intensified, some IPO companies have begun looking for other partners out of caution.
Recently, Hunan Ordnance Industry Group Co., Ltd. (hereinafter referred to as "Hunan Ordnance"), the tenderer, selected the accounting firm for the company's initial public offering through an open tender, requiring that within one year from the date of the announcement of the tender, the bidder will not be restricted by the CSRC's suspension of acceptance or review of application materials, and will not be suspended from securities business qualifications. The previous IPO accounting firm of Hunan Ordnance was Baker Tilly International.
On August 12, Hunan Ordnance Industry Group Co., Ltd. told the Red Star Capital Bureau that the company had recently noticed rumors about Tianzhi International in the market and had initiated the process of recruiting an accounting firm to avoid any impact on the company.
In response to the rumors, the Red Star Capital Bureau sent an interview outline to Tianzhi International, but no response was received as of press time. The Red Star Capital Bureau noted that since July 30, Tianzhi International has withdrawn a total of four IPO projects, of which three IPOs have been approved for more than a year but have not been submitted for registration.
IPO accounting firm bidding puts forward special requirements
If the business is suspended, double the cost will be paid
On August 8, Hunan Bidding Network released a "Bidding Notice for the Selection of Accounting Firms for Hunan Ordnance's Initial Public Offering". Hunan Ordnance is selecting an accounting firm for the company's initial public offering, and the bidding period is required to be from the date of contract signing to the date when Hunan Ordnance raises funds and is listed for trading.
This tender has five threshold requirements for bidders, in addition to the conventional qualification requirements, the fourth of which has attracted market attention. This requirement is that within one year from the date of the announcement of the tender, the bidder will not be restricted by the China Securities Regulatory Commission's suspension of acceptance or review of application materials, and will not be suspended from securities business qualifications (the bidder needs to provide a letter of commitment, the content of which should include: if the above situation occurs, compensation will be paid at twice the amount of the fees paid by the tenderer at that time).
According to the official website of the Shenzhen Stock Exchange, the Hunan Ordnance main board IPO project was accepted by the Shenzhen Stock Exchange in February 2023 and passed the review of the listing committee meeting on September 21, 2023. The sponsor is Dongxing Securities and the accounting firm is Baker Tilly International. It has been nearly a year since the review, and the IPO has not yet been submitted for registration.
Why would an IPO company that has successfully passed the review suddenly publicly bid for an IPO accounting firm and require the other party to promise that its securities business qualifications will not be suspended within one year?
On August 12, Hunan Ordnance Industry Group Co., Ltd. told the Red Star Capital Bureau that the company had recently noticed rumors about Tianzhi International in the market and had initiated the process of recruiting an accounting firm to avoid any impact on the company.
Hunan Ordnance also stated that the requirement to "promise not to have its securities business qualifications suspended within one year" was based on the consideration that once (the accounting firm) was suspended from business, it would have a significant impact on the company's current stage.
Industry insiders: It is normal for issuers to consider related impacts
After Dahua was fined, some IPO companies have sought other partners
The Red Star Capital Bureau noticed that since the end of July, there has been news on social platforms that Tianzhi International will be suspended from securities business for 6 months.straightIt refers to the negligence of Tianzhi International, an intermediary agency, in the financial fraud case of Qixin Shares (now delisted). In response to the relevant rumors, the Red Star Capital Bureau sent an interview outline to Tianzhi International, but no response was received as of press time.
On August 12, senior investment banker Wang Jiyue told Red Star Capital that it is rare for such IPO companies to require bidders to make corresponding commitments, but it is not surprising. Wang Jiyue pointed out that from the issuer's perspective, if the accounting firm's qualifications are suspended, it will certainly have a significant impact on the company's listing process; if the suspension is due to the accounting firm's previous negligence, the responsibility should be borne by the accounting firm. Therefore, it is normal for the issuer to consider this impact.
It is worth mentioning that Dahua Certified Public Accountants (Special General Partnership) (hereinafter referred to as "Dahua"), which was previously heavily fined for its involvement in the Jintongling (300091.SZ) financial fraud case, has been terminated by clients one after another.
On May 13, the "Administrative Penalty Decision" issued by the Jiangsu Securities Regulatory Bureau showed that after investigation, it was found that when Dahua audited Jintongling's annual financial statements from 2017 to 2022, there were major defects in risk assessment and internal control testing procedures, and appropriate audit measures were not taken to deal with fraud risks. There were major defects in substantive procedures, and it violated the relevant practice standards. The provisions, failed to perform due diligence obligations, and the audit reports issued contained false records.
The Jiangsu Securities Regulatory Bureau decided to order Dahua to make corrections, impose a total fine of 41.32 million yuan, and suspend Dahua from engaging in securities services for six months. According to media reports, a "Letter to Clients" signed by "Dahua Accounting Firm" showed that Dahua was suspended from engaging in securities services from May 10 to November 9.
According to incomplete statistics from the Red Star Capital Bureau, after Dahua received the above-mentioned fine, as of the end of May this year, more than 30 A-share companies including Shanxi Fenjiu (600809.SH) and Yili Group (600887.SH) announced the cancellation of the annual shareholders' meeting to review the relevant proposal to appoint Dahua as the company's 2024 audit agency.
Compared with the annual audit, the IPO business, which is complex in itself, has been hit harder. Wind data shows that since Dahua was fined, nearly 20 IPO projects it participated in have been terminated due to withdrawal of materials. Currently, projects such as Hao Chuang Ruitong IPO and Aifenda IPO have been transferred from Dahua to other accounting firms.
Tianzhi International received multiple penalties this year
Four IPO projects have been terminated recently.
According to the official website, Baker Tilly International was founded in December 1988 and is headquartered in Beijing. It is one of the first professional consulting firms to obtain securities and futures-related business qualifications. Baker Tilly International has a number of business qualifications, including super-large enterprise audits, domestic and overseas listed company audit consulting, financial-related audits, information system audits, judicial accounting appraisals, asset valuations, and real estate valuations.
The Red Star Capital Bureau noted that since the beginning of this year, Tianzhi International has been fined many times for issues related to the quality of its audit practices.
On January 8, the Jiangsu Securities Regulatory Bureau issued a warning letter to Tianzhi International and its three signing accountants, Wang Chuanbang, Wang Wei and Wang Juan. The Jiangsu Securities Regulatory Bureau pointed out that after investigation, they found that in their audit of Shenzhen Lianshuo Technology Automation Co., Ltd., a subsidiary of Heleng (300201.SZ), there were problems such as inadequate risk assessment procedures, inadequate internal control testing and inadequate substantive procedures.
On May 21, the Shenzhen Securities Regulatory Bureau issued a warning letter to Tianzhi International and its certified public accountants Qu Xianfu, Fu Jiaoliang and Duan Shan. The Shenzhen Securities Regulatory Bureau inspected the quality of the 2019 annual report audit project of Tefa Information (now ST Texin, 000070.SZ) performed by Tianzhi International and three certified public accountants. After investigation, it was found that there were problems such as inadequate implementation of revenue audit procedures and inadequate implementation of operating cost audit procedures in their audit practice.
On July 10, the Shanghai Stock Exchange’s official website disclosed three warning letters. Due to multiple violations in the major asset reorganization of Zhongyida (600610.SH), Zhongyida, Huachuang Securities, and Tianzhi International were given regulatory warnings. The Shanghai Stock Exchange requires Tianzhi International and relevant accountants to take effective measures to rectify the relevant violations, conduct in-depth investigations on the audit risks of related projects, and effectively improve the quality of audit practice.
Statistics from the Red Star Capital Bureau found that within the 11 days from July 30 to August 9, a total of four IPO projects in which Tianzhi International participated were terminated, namely Wangao Pharmaceutical's GEM IPO, Yippin Pharmaceutical's GEM IPO, Essoka's GEM IPO and Xingbang Intelligent's Shanghai Main Board IPO. All of them were due to the companies and their sponsors withdrawing their applications for issuance and listing. Among them, the first three IPOs had been approved for more than one year but failed to submit for registration.
Red Star News reporter Jiang Ziwen
Editor: Xiao Shiqing
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