Fabrics manufacturer China Hongcheng Holdings clarifies auditor confusion

The inconsistency in the company’s auditor in its Annual Report 2011 and 2010 got SGX confused.

According to a release, China Hongcheng Holdings Limited refers to the queries from SGX in relation to the Company’s Annual Report 2011 and would like to provide additional information thereof.

SGX’s query (a)

We noted from Annual Report 2010 that the audit partner was appointed with effect from financial year ended 30 June 2009. However, in Annual Report 2011, the same audit partner was said to be appointed with effect from financial year ended 30 June 2011. Please provide clarification on when the audit partner was appointed. 

Company’s response
The financial statements of the Company for the year ended 30 June 2010 were audited by Grant Thornton (“GTHK”), now known as JBPB & Co. Due to a merger of business of GTHK and BDO Limited (“BDO”) to practise in the name of BDO as announced on 26 November 2010, GTHK resigned as auditor of the Company on 3 December 2010 and BDO was appointed as auditor of the Company on the same day. The financial statements of the Company for the year ended 30 June 2011 were audited by BDO.

In other words, different audit firm was appointed for each of the financial year ended 30 June 2010 and 30 June 2011 although the engagement partner remained the same person. Accordingly, the appointment of the audit partner-in-charge of BDO only started from the current year (i.e. the audit partner-incharge of BDO was appointed from the financial year ended 30 June 2011) and that is the way that was disclosed in the Company’s Annual Report 2011.

Notwithstanding the above, the Company and BDO do understand and observe the existing regulations on the 5-year audit partner rotation rule. Accordingly, in determining the audit partner-in-charge succession and rotation plans, BDO has followed the spirit of the aforementioned rule and counted service years of the same audit partner under both GTHK and BDO. In other words, BDO will not extend the service years of the existing audit partner-incharge on this assignment continuously beyond the 5-year limit.

SGX’s query (b)
In compliance with Rule 1207(18)(b), please disclose whether the Company prohibits officers from dealing in the Company’s securities on short-term considerations.

Company’s response
In addition to the adherence of the internal compliance code of conduct by the Company as described in the Company’s Annual Report, the Directors, key officers and employees of the Group are discouraged from dealing in the Company’s securities on short-term considerations.