China Mobile's parent company tightens audit management

China Mobile Communications Corporation is tightening up its accounting practices after a national audit found "weaknesses" relating to inflated sales and unaccountable receipts.
Written by Ellyne Phneah, Contributor
China Mobile reportedly amassed fake unaccountable receipts, while certain units inflated sales figures by tens of millions of dollars.

China Mobile Communications Corporation (CMCC), the parent company of China Mobile, has pledged to tighten up internal management and accounting practices. This commitment comes after a government-led audit found discrepancies in terms of inflated sales and receipts that cannot be accounted for.

In a statement to the Hong Kong Exchange last Friday, China Mobile said its unlisted parent company was audited in 2012 by the country's National Audit Office. The findings revealed the CMCC harbored "some weaknesses in certain aspects of accounting and internal management", it stated.

A separate Reuters report last Saturday shed more light on the audit report, saying CMCC's 2011 results showed problems such as inflated sales and receipts which cannot be tallied.

For example, China Mobile's Inner Mongolia and Fujian office amassed fake, unaccountable receipts totaling around US$100 million from 2009 to 2011. Some other units also inflated sales figures by tens of millions of dollars between 2005 to 2011.

"The accounting information basically reflected the company's accounting and operations accurately, but there are also inadequate supervision of its units and imperfections in its integrity and system," the National Audit Office said.

Rectifications in place

However, China Mobile stressed in the statement that its board of directors and senior management have "attached great importance to the problems" identified in the audit and had drawn up and "proactively" executed detailed rectification measures and plans.

"At present, except for a particular matter that has not yet been executed pending approval by regulatory authorities, the rest of the problems identified in this audit have already been rectified and the relevant responsible persons have been dealt with in a serious manner," the telco said, but did not specify the measures taken.

China Mobile also said the problems in the audit would not have any material impact on its overall operating results and financial statements. China Mobile did not respond to Reuters' queries.

The Chinese telco in March reported a 2.7 percent increase in profit for the financial year of 2012 to reach 129.3 billion yuan (US$20.6 billion), driven on by revenue growth from its wireless data business which spiked by 53.6 percent. 

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