Chinese auditor claims COSCO falsified earnings reports

Chinese auditor claims COSCO falsified earnings reports

A report by the Chinese government’s National Audit Office on Sunday has concluded that the COSCO group falsified its earnings reports from 2008 to 2013.

The report found that the company earned RMB 298m (US$48m) worth of revenue more than it had reported in the period from 2008 to 2013. On top of this, the report alleges, costs of RMB169m (US$27m) were left out. In total then, profit was RMB129m (US$20m) less than reported.

The COSCO group includes container terminal operator COSCO Pacific and the world’s sixth biggest container shipping line COSCO Container Lines.

As well as misreporting profit, the report alleges a range of malpractices took place include bribing officials and decisions being made without proper investigations and without following specified decision-making procedures.

From 2009 to 2013, the group lost RMB 34.1bn (US$5.5bn) on its long-term chartering of vessels. The report attributed this to insufficient risk management and operational supervision.

In 2013, a leading COSCO executive Xu Minje was arrested as part of investigations into corruption. A day later, he resigned his position. Investigations are ongoing and on June 10 he was expelled from the Chinese Communist Party.

Earlier this year, the Central Commission for Discipline Inspection found that senior staff at COSCO had used relatives to start companies which did business with COSCO. Additionally, it was found that managers accepted commissions and rebates from other businesses and spent company funds on entertainment inappropriately.

Ma Zehua, president of COSCO group, has promised that the company will make effective plans to correct the issues, and punish the employees who have violated anti-corruption rules.

In 2014, problems were discovered at COSCO’s rival, China Shipping, as the National Audit Office said: “In 2012, China Shipping’s consolidated financial statements inadequately offset internal transactions, overstating RNB426m (US$69m) of profits.”

Further investigations are ongoing into COSCO and other state-owned companies, as part of China’s anti-corruption drive.