Questionable company payouts of 24 million yuan (HK$27.74 million) were partly to blame for a dramatic plunge in the share price of Beijing-based Duoyuan Printing on the New York Stock Exchange last week, according to documents filed with the US Securities and Exchange Commission (SEC).
The manufacturer of offset printing presses announced on September 13 that several executives had resigned, including its chief executive officer and chief financial officer, and that it had fired its accountants from Deloitte Touche Tohmatsu.
The announcement caused Duoyuan Printing's stock to lose more than half its value in a single day, leading a US law firm to file a class action lawsuit against the company on behalf of investors.
The problems stem from concerns raised by Deloitte after it was hired as the company's auditor in May, according to a statement Duoyuan Printing filed with US financial regulators.
In particular, Deloitte challenged the 'authenticity' of supporting documents related to millions in marketing and trade show expenses. It also questioned inconsistencies in the company's information about some of its vendors and distributors, and initiated an investigation. But the accounting firm was not satisfied with its access to bank statements.
Duoyuan Printing chairman Guo Wenhua sought to reassure shareholders in a conference call on September 15 that ditching Deloitte was a practical measure. Spurred by frustration with the auditor's processes, he said, the move was intended to ensure that the annual report was filed on time.
Guo was 'surprised' by the decision of several executives to quit, and firmly denied any company wrongdoing.
