China's Kangde Xin says auditor cannot verify 12b yuan of deposits

[SHANGHAI] China's Kangde Xin Composite Material Group said its auditor could not confirm the authenticity of the company's bank deposits worth 12.2 billion yuan (S$2.45 billion), as it responded to regulators' queries.

In a statement on the Shenzhen Stock Exchange late on Wednesday, the loss-making producer of high polymer materials said that the amount of deposits at Bank of Beijing's Xidan branch recorded on the company's books was at odds with the amount the lender reported to its auditor.

Bank of Beijing's Xidan branch sent a letter to auditor Ruihua Certified Public Accounts saying the balance of the company's deposit account is zero, although Kangde Xin's books showed the company and its three subsidiaries had 12.2 billion yuan deposited at the bank.

Kangde Xin was responding to an exchange question as to why Ruihua declined to guarantee the authenticity of its cash positions in its annual auditing report.

China is stepping up scrutiny of listed companies' disclosures.

Last week, Kangmei Pharmaceutical, a producer of traditional Chinese medicines, said in a filing that an accounting "error" led to an overstatement of its 2017 cash positions by 29.9 billion yuan.

REUTERS