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 Untrue Audit Report was Exposed; Xinhua Won Over KPMG in the First Instance 
 2008-08-08 
 

¡¡¡¡After GE Pacific Private Limited Company of Singapore (hereinafter called GE) procured Xinhua Control Engineering Co., Ltd. (hereinafter called Xinhua Engineering), a subsidiary of Xinhua Control Technology (Group) Co., Ltd. (hereinafter called Xinhua Group) in 2005, KPMG Huazhen Accounting Firm , Shanghai Branch (hereinafter called KPMG) issued an untrue audit report on Xinhua Engineering¡¯s financial statements of 2004. This news was known by ¡°China Business News¡± from the civil judgment on the above mentioned case in Minhang District People¡¯s Court.¡¡
¡¡¡¡The judgment pointed out that Xinhua Engineering¡¯s processes of  ¡°error correction &retroactive adjustment¡± against the integrated assets evaluation and accouting adjustment based on the date November 30, 1994,  were procedurally illegal.  In fact, the integrated assets evaluation and accouting adjustment based on the date November 30, 1994 conducted by Xinhua Engineering in 1995 was in accordance with ¡° Administration Methods on State-Owned Assets Evaluation¡± and related regulations enacted by the Ministry of Finance. Xinhua Engineering executed related approval procedures required in ¡° Administration Methods on State-Owned Assets Evaluation¡± and obtained related approvals from Shanghai State-Owned Assets Administration Office and the Ministry of Machinery Industry of that time. So it is deemed legal in procedure.
¡¡¡¡But KPMG issued an untrue audit report on this. The judgment averted that the Audit Report which was done toward the financial statements of 2004 is definitely untrue according to the related regulations on tort cases which occured during the Accounting Firm¡¯s audit activities¡±enacted by the Supreme People's Court.
¡¡¡¡It also mentioned in the judgment that as long as KPMG¡¯ auditors keep reasonable professional skepticism, they could find easily that Xinhua Engineering¡¯s "error correction & retroactive adjustment" hadn¡¯t gone through related procedures and contradicted to the reviews of some governmental organs. It was wrong obliviously.  Yesterday, KPMG spoke to ¡°China Business News¡± on the phone that the case was still in progress so no comment.

                                                                                    From: China Business News 

 
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