The China Securities Regulatory Commission (CSRC), the watchdog of China's stock market, was taken to court Monday by the Henan-based Huawei Accounting Consultation Company.
The company was fined 300,000 yuan (US$36,100 US dollars) by the CSRC for allegedly failing to detect false financial information in a listed company's books.
The first hearing was held at the Beijing No. 1 Intermediate People's Court Monday, but no decision was made.
This is the first time the CSRC was prosecuted by an accounting firm for listed companies and the seventh administrative charge against the CSRC since 2001, according to Lin Minhua, chief judge of the administrative division under the court, which has jurisdiction over the CSRC.
CSRC confiscated the Henan Huawei Accounting Consultation Company's alleged "illegal income" of 300,000 yuan (US$36,100) in 2002, as Huawei did not fulfill its duty in auditing the 1999 year-end report of the listed Yutong Company in 2001, according to sources with the CSRC.
After auditing the financial report, the CSRC found that Yutong had placed the figure of its debt at 135 million yuan (US$16 million) less than the real figure to cover up its real financial condition, in an attempt to meet the requirements of issuance.
However, Huawei claimed Yutong should be fully responsible for the false financial report. Yutong colluded with its bank and gave false bank statement to the accounting firm, said the plaintiff.
According to China's Regulation on Stock Circulation and Transaction Management, accounting firms that prepare inaccurate documents will have their illegal income confiscated and they will be fined.
(Xinhua News Agency August 5, 2003)
