Ruihua Audit Residual Survey: 10% Listed Companies Refinancing Affected By Investment Banks Encountered "Embarrassing" Moment

In early July 2019, because of *ST financial fraud, Ruihua accounting firm (hereinafter referred to as "Ruihua") was suspected of violating securities related laws and regulations in the audit process and was investigated by the SFC. After that, a large number of companies' IPO and refinancing projects encountered "Filing immediately" and replacing audit institutions. "002450.SZ" In February 14, 2020, the new regulation of refinancing came to the ground, and the enthusiasm of refinancing was greatly activated. However, it was also affected by the case of Ruihua, and some of the listed companies faced the problem of "refinancing" highlighted.

A few days ago, in twenty-first Century, the economic news reporter was informed by the investment bankers. After the SFC's window guidance, the application materials for refinancing projects of listed companies had been rejected for 1 years in the past 3 years.

This led to a difficult game between some listed companies and audit institutions. Contradictions in the listed companies scrambling to rush to refinance feast is even more prominent.

According to the twenty-first Century economic report reporter statistics, as of the late April 2nd data, there were not less than 377 A share listed companies annual reports auditors in the 2017-2019 years.

This means that nearly 10% of A shares will be affected by refinancing in the near future.

With the disclosure of annual reports, more listed companies will send refinancing materials, which will be more obvious.

Refinancing of Ruihua aftermath "embarrassment"

Since the new regulation of refinancing in February 14th, the enthusiasm of the refinancing market has been ignited.

According to the twenty-first Century economic report reporter statistics, as of the end of April 2nd, 317 listed companies have released or updated the refinancing scheme, which is a blowout compared with the previous number.

This has also led some listed companies to accept the audit of Ruihua to find that even after the replacement of accounting firms, the repercussions of Ruihua's investigation are still in progress, and the refinancing process is still being affected.

"About 9 or October last year, the SFC had window guidance, and refinancing materials had not been accepted by auditors." in the past 3 years, 1 years were not acceptable for auditors, and new accounting firms needed to be re audited. An investment bank who has repeatedly worked on refinancing projects told the twenty-first Century business reporter.

As the head of the A share audit market, the repercussions of Ruihua will affect the refinancing process of many listed companies.

In twenty-first Century, according to the audit data of Wind annual report as at the end of April 2nd, in 2017, the auditors of the annual reports of 356 listed companies were Ruihua. In 2018, 325 annual reports were audited by Ruihua, of which 21 were audited in 2017. Of the listed companies that have disclosed annual reports in 2019, 5 were audited by Ruihua, and all of them were audited by Ruihua 2 years ago.

Accordingly, in the past 2017-2019 years, there are not less than 377 A share listed companies annual reports audit institutions related to Ruihua. This means that 10% of A shares will be affected by the recent start-up of refinancing.

The trouble is not only the need for re audits.

"There will be differences between some listed companies and audit institutions, and different audit teams may draw different conclusions. Audit institutions may prefer to produce different reports from" Ruihua ", showing that they are more cautious. And the listed companies are very sensitive to this. After all, the new securities law is severely punished, for fear of different audit results will cause a series of problems, and internal control is not rigorous. The aforementioned investment bankers said, "we understand that many listed companies and audit institutions are in a stalemate."

Prior to this, "filing is stopped", many companies audited by Ruihua have experienced a suspension of IPO and refinancing projects.

According to the decision of the SFC to amend the provisions on the procedures for the implementation of the administrative licensing procedures of the China Securities Regulatory Commission, when the securities intermediary service agencies or their employees are suspected of being investigated illegally, or are investigated by the judicial organs and have not yet closed the case, the CSRC will not accept or suspend the examination of the administrative licensing application documents issued by similar businesses.

This means that the SFC will not receive materials from customers who are serving customers in Ruihua until the SFC's investigation is closed. If the refinancing, reorganization or IPO materials have not yet been reported, the clients accepted by the SFC will only be able to replace the intermediaries.

Thus, in the second half of last year, a large number of listed companies and listed companies involved in Ruihua opened the exchange.

The document also stipulates that the securities intermediary service agencies should assign personnel who have nothing to do with the investigation items to review the items being discontinued. If the application is in conformity with the administrative licensing conditions, the SFC shall resume its examination.

"For refinancing nearly 3 years, the financial data related to Ruihua, from the back of the identification is good, can also avoid retrial triggered the conflict between listed companies and accounting firms." The foregoing investment bankers suggested.

Chain reaction survey

The number of A share listed companies audited by Ruihua's annual report dropped sharply in 343 years to 35 in 2018. After being investigated, Ruihua has largely withdrawn from the A share audit market.

In addition, in twenty-first Century, the economic news reporter also learned from the staff and staff offices of Ruihua that some of the banks did not accept the audit report issued by Ruihua. Some of Beijing's state-owned audit teams are still left behind in the project, but it is still uncertain whether they can get the orders from state-owned enterprises through bidding.

The Great Northern Wilderness (600598.SH) became a listed company that did not rehire Ruihua recently. Its announcement also revealed the latest situation of China.

In March 29th, the Great Northern Wilderness issued the annual report of 2019, and disclosed the announcement on the renewal and remuneration of accounting firms. It said that, considering the continuity of business and the degree of understanding of the company, it was proposed to rehire Ruihua accounting firm (special general partnership) as the company's auditor for financial statements and internal control in 2020.

Ruihua was founded in September 1980. It is the first batch of accounting firms to be granted A+H share qualification and the first batch to complete the transformation of special general partnership.

According to the official website of Ruihua, as of the end of 2019, the number of Listed Companies in Ruihua was 82, which was reduced by 80 compared with the list of listed companies. According to the the Great Northern Wilderness announcement, in 2018, 343 listed companies were audited by Ruihua annual reports. As of March 1, 2020, the number of listed companies audited by Ruihua annual report was only 35.

At the same time, the number of employees in Ruihua office is also decreasing, especially the number of CPA.

According to the the Great Northern Wilderness bulletin, by the end of 2019, the number of registered accountants in Ruihua was 1212, a decrease of 1040 compared with 2018. In addition, at the end of 2019, the number of partners was 153, the number of registered accountants engaged in securities business was 794, and the total number of employees employed at the end of 2019 was 6796 (including 1212 registered accountants).

Earlier, there were about 360 partners in Ruihua, which means that more than half of the partners had left. In 2018, there were 40 branches in Ruihua. The the Great Northern Wilderness proclamation shows that Ruihua has set up 35 branches throughout the country.

"I think most of them are transferred now, only a small part of them, such as the audit of state-owned enterprises, and a few other departments left behind. Maybe some non-listed company audit business has not been reflected for the time being, so it is still here." A person close to Ruihua told reporters in Beijing.

At present, the investigation result of Ruihua has not yet been released. With the implementation of the new securities law in March 1st, the A share audit market will usher in a new round of shuffle.

After the new securities law abolished the qualification of securities and futures businesses of listed companies, the new accounting firms entered the board. In March 27th, *ST new billion announcement was proposed to appoint the Shenzhen auditor's Office (hereinafter referred to as the Shenzhen Hall) as the audit institution of the year 2019.

It is worth noting that there are only 3 Registered Accountants in Shenzhen.

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