I posted recently on the case of Deloitte, and an action by angry shareholders in Kelon (Accountants are Called to Account). Now it is the turn of Ernst & Young to take the stage.
In a move worthy of Beijing’s re-statement of GDP growth last year (see here), Forbes reports that the accounting firm “has withdrawn a report that was criticized last week by China’s central bank for its ‘ridiculous’ estimate of the debt burden of domestic lenders.” The FT adds that the figure “is at odds with the firm’s own auditing of Chinese banks” (it audits ICBC, which is about to list).
The report had said that the total value of non-performing loans (NPLs) in China’s banks was US$911 billion, with US$358 billion being held by the big four commercial banks. The official figure for the big four is reported to be US$133 billion.
Ernst & Young is quoted as saying: ‘Upon further research, Ernst & Young Global finds that this number cannot be supported, and believes it to be factually erroneous”. They added “’we sincerely regret any misleading views that the report conveyed”.
I bet they do! It does not help one’s domestic business to be picking up black marks from the government, your major clients or, as an accountant, to get your sums wrong…then again, who really does know the true state of China’s NPLs?
All in all it is a timely reminder that numbers are tricky territory in China, whether they come from a leading professional services firm, or the central government. It makes good sense to do some research, use multiple sources (it is not unknown for statistics to be mangled by bad translation, let alone poor research), and to have a reality check from people who work on the coal face.
Let us know if we can assist with your research needs. Or crisis management and PR!
See news sources:
Ernst & Young withdraws China bank NPL report after acknowledging …
Forbes – USA
BEIJING (AFX) – Ernst & Young said it has withdrawn a report that was criticized last week by China’s central bank for its ‘ridiculous’ estimate of the debt …
Ernst & Young withdraws China NPL report
Ernst & Young, the international accountancy firm, has withdrawn a controversial report on China’s non-performing loans, saying it is “factually erroneous”.