(Yicai) Feb. 26 -- Chinese regulators have penalized almost 50 accounting firms for various rule breaches since the start of the year amid stricter oversight.

Among them, nearly 20 faced direct economic penalties, such as fines or confiscation of illegal gains, according to Hithink RoyalFlush Information Network’s financial data terminal iFinD. The others received regulatory warnings, were added to corporate integrity files, or faced supervisory discussions and other punitive measures.

These companies received a total of 80 penalties, of which 56 were related to violations linked to the financial statement audit process, according to iFinD data. Other violations included employee misconduct in trading shares of listed companies and non-compliant fee arrangements.

For example, the China Securities Regulatory Commission fined Shanghai Tianheng Accounting Firm CNY44.5 million (USD6.1 million) for issuing false statements and failing to exercise due diligence in the audit report of Zhongli Group’s financial statements. It was this year’s largest fine of such kind.

Other examples are Da Hua Certified Public Accountants and Pan-China Certified Public Accountants, which faced multiple violations and received five regulatory penalties each.

“Due to the competition, issuing reports for money has indeed become a thing in the industry,” a partner at an accounting firm in Beijing told Yicai, adding that some accountants abandon their professional ethics because of money temptations.  

On the other hand, if not enough detailed testing is conducted, it is also very likely that the work of auditing companies is compromised under circumstances such as heavy workload, tight deadlines, and insufficient workforce, according to a staffer from an auditing firm in southern China.

Accounting firms need to improve their internal governance and quality assessment systems and strengthen their partners’ professional ethics education, said Liu Chunsheng, an associate professor at Central University of Finance and Economics. Industry associations also need to strengthen the daily supervision of their members, he added.

Regarding the introduction of artificial intelligence tools into daily auditing work, Liu noted that while AI can enhance audit efficiency in certain aspects, as of now, it still cannot replace human involvement in key areas, such as risk assessment, communication, professional judgment, and accountability.

Editors: Tang Shihua, Futura Costaglione