Audit resignations throw suspicion on Chinese accounting

CHINA MEDIAEXPRESS Holdings said chief financial officer Jacky Lam and auditor Deloitte Touche Tohmatsu have stepped down.

Online business service provider Subaye’s CFO also resigned on Monday, and Reuters reports China Agritech dismissed auditors Ernst & Young Hua Ming over questions about its independence.

Last month, short seller Muddy Waters Research accused China MediaExpress Holdings of inflating profit, leading to its stock being halted on 11 March after shedding 48% in six weeks, Bloomberg reveals.

Deloitte’s resignation letter said it “was no longer able to rely on the representations of management” and warned historical results could also be unreliable, according to a statement from the advertising firm.

Fears surrounding the trustworthiness of accounting standards in some Chinese businesses have sent stock plummeting.

The advertising firm is one of around 370 that are listed in the US through a merger with a shell company, which involves less rigorous scrutiny than initial public offerings as no money is raised.

Investment company C.V. Starr and New York-based hedge fund D.E. Shaw were major holders in China MediaExpress over the last three months, but neither was available for comment.

Related reading

tax dictionary