Friday 5 February 2021 1:45 pm

Deloitte China whistleblower circulates damning presentation on social media that alleges audit failures of RYB Education

Big Four firm Deloitte is under pressure after one of its employees reportedly made a 55-page PowerPoint presentation that exposed the firm’s alleged accounting violations in China.

The PowerPoint, which has been circulating on Weibo, a Chinese website similar to Twitter, has alleged that when Deloitte was auditing the financial data of its client RYB Education in 2017, a member of the auditing project told the whistleblower “not to be so careful and fill the numbers randomly,” the Global Times reported.

Read more: UK directors to face fines in major overhaul of audit rules

The same member of staff also allegedly confessed to have “fabricated” many such figures in past audits.

The whistleblower also alleged that a Beijing training school under RYB Education had spent most of its management fees raising the children of the school’s senior executives in overseas countries, such as golf study fees.

A partner at Deloitte noticed this, the whistleblower said, but chose to define the management fees as an unimportant and low-risk accounting title, which required just a simple check.

Read more: BEIS audit reform proposals coming ‘in next couple of weeks’

In statement, Deloitte China threatened legal action on the “spread of false information about Deloitte”.

“We have noticed that there are currently several doubts about Deloitte Beijing’s individual audit projects in 2016 and 2017 circulating on social media platforms. In fact, the firm previously received a related matter reported by an employee through internal channels, and has conducted a comprehensive investigation of this, and found no evidence that affects the adequacy of our audit work. Therefore, the relevant audit work supports our audit opinion. We will investigate any queries we receive,” the statement said.

“We reserve the right to take legal action for the spread of false information about Deloitte.”

Tightening regulation

The Big Four firms have received criticism for poor audit quality in various countries around the world.

In the UK audit firms have come under increasing pressure in recent years following accounting scandals including the collapse of Patisserie Valerie, BHS and Carillion.

Regulators across the world are tightening up on rules around audit. Last summer the UK’s audit regulator the Financial Reporting Council ordered the Big Four firms – Deloitte, KPMG, PwC and EY – to separate their audit units from the rest of their business by 2024.

Singapore’s regulatory unit recently said all primary-listed issuers must appoint an auditor registered with Singapore’s Accounting and Corporate Regulatory Authority to conduct their statutory audits, in a move that effectively brought all listed company audits under the oversight of the regulator.