KPMG settles lawsuit with $84m payout after failing to spot fraud at Chinese group
KPMG has agreed to pay around $84m to settle legal claims after failing to identify fraud at a Chinese timber company.
China Forestry’s IPO led to backlash against poor listing standards in Hong Kong.
Its liquidators claimed the accounting giant was negligent in failing to detect serious false accounting by some of the company’s top management ahead of its IPO listing in 2009, according to a report in the Financial Times.
The lawsuit was settled last month on the eve of a 10-week trial in Hong Kong, according to two people familiar with the matter.
China Forestry’s liquidators claimed that during a pre-IPO audit KPMG failed to detect that executives had falsified the company’s assets and revenue by submitting forged bank statements and customer records.
The liquidators also made the accusation that some KPMG staff had falsified papers themselves during the audit.
It is the latest incident for KPMG which has attracted attention to its audits of Chinese companies that list outside the mainland.
Although China Forestry raised $216m when it listed in Hong Kong, the company was suspended from trading after just over a year when its auditor flagged accounting irregularities.
Despite prior backing by international investors Carlyle and Partners Group, China Forestry was delisted in 2017.