In July 2022, China’s Ministry of Finance (MOF) launched an investigation into the Fujian Accsoft Technology Development Co Ltd. (福建埃森思索科技發(fā)展有限公司), a wholly-owned subsidiary of Malaysia-listed Lambo Group Berhad, and its related accounting firm, the Shandong Branch of Zhongxingcai Guanghua Certified Public Accountants (中興財(cái)光華會(huì)計(jì)師事務(wù)所), and imposed penalties on these companies.
It is the first time the MOF has imposed administrative penalties in cross-border accounting audit supervision. More specifically, it is the first time that Chinese law-enforcement authorities have assisted in investigating accounting fraud in China upon request by a foreign government.
This case, in our opinion, offers a viable remedy for the financial fraud committed by Chinese companies with overseas listings. It indicates that the government of the region where the company is listed (e.g., the United States) can seek assistance from the Chinese government in investigating financial fraud by the company’s Chinese subsidiaries.
On 13 July 2022, the MOF released the No.42 Accounting Information Quality Inspection Announcement (中華人民共和國(guó)財(cái)政部會(huì)計(jì)信息質(zhì)量檢查公告第四十二號(hào)), stating that its investigation into this fraud was initiated by Malaysia’s request for assistance and based on the Memorandum of Understanding between the Ministry of Finance of the People’s Republic of China and Securities Commission Malaysia for Cross-border Regulatory Cooperation on Accounting and Audit Matters.
Cover Photo by Elijah Chen on Unsplash
Contributors: CJO Staff Contributors Team
