Gu Chujun misread Deloitte

A few days ago, news came from the Foshan Intermediate People's Court that the Gu Chujun case, which had been adjourned for a month, is being heard again. The relationship between Kelon and Deloitte is also in the spotlight again.

In the court hearings on November 7 and December 12 last year, Gu Chujun pointed the finger at Deloitte twice: in the 2004 Kelon annual report, the disputed 510 million sales were in Deloitte's "" persecution and coercion". The public was in an uproar, and Deloitte, not to be outdone, also issued a statement twice in response to Gu Chujun's bombardment: Deloitte's auditors did not participate in or assist in any form of fraud in the Gu Chujun case.

A few years ago, when I was employed by Kelon, Deloitte may not have imagined that it would now go to court with Gu Chujun, let alone become Gu Chujun's target. According to the Company Law of China, a company shall prepare a financial accounting report at the end of each fiscal year, which shall be audited by an accounting firm in accordance with the law. As a listed company, Kelon hires professional accountants for auditing, which is not only responsible for the company, but also for the majority of shareholders. Therefore, it can be considered that Deloitte hired by Kelon is an accounting firm that can conduct true audits and express fair opinions.

The report of the audit processing results of 510 million led to the opposite sides. At the end of 2004, Kelon confirmed the total sales revenue of 510 million yuan to Wuhan Evergreen Electric Company and Hefei Weixi Electric Company by pressing the goods. For this fund, Deloitte has provided Kelon with 4 options. According to Gu Chujun in court, both he and the board of directors asked Deloitte to choose an audit plan with an unqualified opinion: the sales revenue is not confirmed in the annual report, and Deloitte is Kelon’s Long issued an unqualified audit opinion in the 2004 annual report. However, Deloitte ignored their request and chose to issue a qualified audit opinion on its own, and confirmed the income in the annual report.

According to relevant accounting and auditing standards, accountants conduct external audits and express independent opinions on the financial reports issued by the auditee. In this process, the accountant needs to communicate with the relevant personnel of the audited unit, but the final audit report is still decided by the management of the audited unit.

Gu Chujun said that when they sent people to argue with Deloitte, Deloitte insisted that it would not give a report unless they followed their advice. They were forced to take Deloitte's advice in a time-critical situation.

As senior leaders of a listed company, Gu Chujun and Kelon's board of directors compromised with accountants after being "forced", and even forgot the interests of the company and shareholders. Cooperation with accounting firms is only a part of the cooperation between enterprises and external parties. I believe Kelon will cooperate with many other organizations every year. If there are more cooperation projects, this kind of "compromise" will also increase, will the company still have development prospects? Therefore, as a senior executive of an enterprise, when cooperating with external organizations, you should maintain a firm position and a clear understanding, and should not let the enterprise fall into a passive state because of covetousness.

Some accountants believe that Gu Chujun's defense in court has certain credibility. From the perspective of Gu Chujun and Kelong, the most favorable way is to choose not to confirm the sales revenue of 510 million, and Deloitte will issue an audit report with unqualified opinion. As the auditor of Kelon, Deloitte is also very clear: if Kelon had an accident, it must have something to do with it, because at that time the Securities Regulatory Commission had officially launched an investigation on Kelon.

In 2003, Deloitte once issued an unqualified audit report for Kelon. If it continues to issue an unqualified audit report, it will bring great risks to Deloitte. Therefore, out of self-interest, Deloitte will choose the audit report with qualified opinion, and confirm the sales revenue of 510 million in the annual report.

Based on the serious fraud of accountants in China's domestic market and the immaturity of accounting firms' auditing, Gu Chujun and the senior management of Kelon unanimously chose a foreign brand - Deloitte, one of the world's four largest firms, because this choice can also allow shareholders Don't worry. But Deloitte disappointed Gu Chujun and Kelon's board of directors: when Kelon was in trouble and urgently needed a corresponding audit report, "Deloitte needs an audit report with qualified opinions as its own talisman." Analysis of Gu Chujun's statement: If Deloitte issued a report in accordance with the requirements of him and the board of directors, there would be no fraud, let alone breaking the law.

It is not yet possible to conclude that Gu Chujun is right, or that Deloitte is right. However, other companies can draw a revelation from the conflicts between them, that is, companies should take Kelon as a lesson, and be cautious when choosing external cooperative agencies, especially accounting firms, for audit work. Enterprises should first consider the credibility and professional ethics of accounting firms. Enterprises should widen their "wisdom eyes" and find "MR RIGHT" that can serve the enterprise and shareholders from an impartial perspective.

The author is the deputy editor of the CEConline website