For the first time a Big Four accounting firm faces a lawsuit in mainland China. The legal action was brought by a Jinzhou Port Co. shareholder who has sued the company and KPMG alleging she lost money due to falsified financial statements.
Accounting problems surfaced at Jinzhou Port Co. in 2001 when an audit conducted by the Ministry of Finance produced information about inflated revenue and assets and understated costs at the company. Last year Jinzhou issued revised financial statements for 1996 to 2000 showing a change of 367.18 million yuan or approximately US$44 million. The Ministry of Finance fined Jinzhou 100,000 yuan or approximately US$12,000.
There is speculation that the suit will open the door to other action against the large international accounting firms. "I think the result of the case is uncertain but the action is very significant to the legal system and the stock market development in China," said Huang Weimin, a partner in Grandall Legal Group, one of China's leading law firms.