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Sandy Li

The auditor of Chaoda Modern Agriculture has refused to endorse the company's annual results, threatening a fresh crisis of confidence in SAR-listed mainland private firms.

The dispute between Chaoda and PricewaterhouseCoopers (PwC) over the auditing report came just hours after the company released the results on Monday, sources said.

The reasons behind PwC's sudden decision are not known, but market speculation suggested a 55.9 million yuan (HK$52.7 million) tax provision the company made could be at the centre of the dispute.

The auditor wanted to make a bigger provision given that Chaoda was ending its full tax holiday for operating in a special economic zone and would have to pay taxes at a rate of 50 per cent for the next three years, sources said.

Neither PwC nor Chaoda would comment yesterday.

PwC is also the auditor of embattled orchid grower Euro-Asia Agricultural, which is being investigated by the mainland securities regulator over alleged accounting irregularities.

Chaoda, a producer and distributor of organic and green goods, was also questioned yesterday by Hong Kong Exchanges and Clearing (HKEx) over its failure to issue a detailed results announcement on Monday.

An HKEx spokesman said: 'An inquiry was needed as the company did not publish a detailed announcement in the newspapers right after its results were made public. We only received a results summary from the company.'

Listed companies are required to publish detailed results in at least one Chinese- and one English-language newspaper for the information of shareholders.

'It is not a question of whether we are keeping a closer watch on mainland private companies,' the HKEx official said, adding that all listed companies had to publish a full results announcement.

Analysts and fund managers were surprised yesterday by the events at Chaoda, saying the market feared a repeat of the furore surrounding Euro-Asia.

'They (Chaoda's management) said the auditing is not really completed . . . and they are still working with the auditors,' said one analyst.

The explanation was made when the company was asked to explain its trading suspension yesterday, the analyst said.

The company hosted a 12-table luncheon meeting for analysts and fund managers after announcing a bumper full-year net profit of 622 million yuan - up 41.1 per cent year on year.

'Obviously, a lot of people are very sceptical about mainland private companies . . . the whole thing [about Chaoda] is very strange and we do not know what happened,' another analyst said.

Analysts were disappointed that Chaoda had failed to disclose more financial information despite saying it would increase transparency to restore confidence in private mainland firms.



PwC refuses to endorse Chaoda's annual results