Responding to financial statement fraud allegations: What you should consider in your role as an INED / audit committee chair

September 2020

Today, the uncertainties and challenges created by the pandemic and geopolitical events have affected businesses across the globe. As many companies struggle with the pressure to perform in such a difficult environment, experience tells us a new wave of fraud is anticipated to come to light.  In recent months, allegations of accounting fraud against certain overseas-listed Chinese companies have hit the headlines which has cast doubts on the integrity of the financial statements of those companies.

How would you respond if you are an independent non-executive director (“INED”) or the audit committee (“AC”) chair of one of those companies?  Without promptly addressing the issues and effectively managing the key stakeholders, the issues can easily turn into a crisis for the company.

Working together with the PwC team, this article sets out the key areas that INEDs and AC chairs of Hong Kong and overseas-listed Chinese companies need to be mindful of in relation to managing different stakeholders as well as considerations on “Day 1” when such allegations are made and the subsequent events.

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William Marshall

Gigi Woo
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Tiang & Partners
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William Marshall

Chris Cartmell
Counsel
Tiang & Partners
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