Sloppy accounting at China Dongxiang (3818)
16 October 2015
An alert Webb-site reader points to multiple errors in the 2014 annual results and annual report of China Dongxiang (Group) Co., Ltd (3818).
In both documents, the net current assets shown in the consolidated balance sheet for the comparative year, 2013, are RMB5,309.953m. This is overstated by exactly RMB400m. The correct figure is RMB4,909.953m, as shown in the original 2013 annual report. The auditors, PricewaterhouseCoopers, failed to detect this error. The Stock Exchange should require a corrective announcement and the Financial Reporting Council should look into the audit.
Secondly, both documents (p28 of the results, p25 of the annual report) list the current ratio (the ratio of current assets to liabilities) for 31-Dec-2014 as 18.0. The correct figure should be 6.3. Page 35 of the results also misstates the figure as 18.1, so it is not even internally consistent. Page 35 of the results also states that at the end of 2014 "current assets exceeded current liabilities by RMB5,620 million". The correct figure should be RMB4,992m, as shown on page 32 of the annual report.
Thirdly, the tables in which the current ratio is contained use mismatched footnotes. The references to notes 4, 5 and 6 should be to notes 5, 6 and 7. There is no footnote for the current ratio.
Update 28-Jan-2016
On 30-Oct-2015 the company made a clarification announcement. On 28-Jan-2016, the Financial Reporting Council replied to us as follows:
I refer to your email dated 20 October 2015 relating to the consolidated financial statements of China Dongxiang (Group) Co., Ltd and its subsidiaries for the year ended 31 December 2014.
The Financial Reporting Council noted that the errors identified in your complaint had been corrected by the listed company concerned through its announcement dated 30 October 2015 and that the original misstatement would not affect the true and fair view of the relevant financial statements.
In view of the above, the Council decided not to conduct an enquiry or an investigation into the non-compliance at this stage. The Council however would advise the listed company and the auditor concerned to act diligently in future when preparing/reviewing financial statements.
We take this opportunity to thank you again for bringing the matter to our attention.
If you have any question, please feel free to contact us.
Yours faithfully
Complaint Handling Officer
Financial Reporting Council
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