Listed China firms' filing delays hit five-year high as virus thwarts auditors

[SHANGHAI] The number of mainland China-listed firms to delay filing annual reports has hit a five-year high, indicating auditors' struggle to sign off accounts after the government effectively closed businesses last month to slow the novel coronavirus outbreak.

The first three months of the year are a busy time for firms with year-end accounts which often need to be filed by end-March. But a widespread lockdown for all of February prevented auditors from visiting clients or reaching bankers and company officials to make the checks needed to approve client accounts.

Under normal circumstances, a delay in filing could impact a company's ability to raise funds if it cannot show would-be investors and lenders up-to-date figures. A delay could also damage confidence in the company, pulling down its share price.

Should the delay run beyond April, a company can apply to the stock exchange for a further delay. If no application is made, it could be fined or have trading of its stock suspended.

As at Friday morning, 852 companies – about 22 per cent of all firms listed on mainland exchanges – had delayed filing annual accounts this year, according to five-year data from official website cninfo.com.cn. Some have since filed, some are still outstanding. The total compared to 506 firms for all of 2019, and is the highest in at least five years.

The virus has had "a large impact on auditing", said Daniel Li, a senior partner at PwC Zhong Tian.

Accountants need to be on site to check original documents, such as contracts and receipts, he said. But they have been unable to do so because authorities ordered many businesses to close and advised people to stay home to stop the virus, which has now infected 242,000 people worldwide and led to 10,000 deaths. REUTERS