Hong Kongs accounting watchdog to investigate Apple Daily publisher Next Digitals financial st

Deloitte declined to comment, while CCTH could not be reached for comment.

06:28

Hong Kong tabloid Apple Daily ceases operations after top executives arrested, assets frozen

Hong Kong tabloid Apple Daily ceases operations after top executives arrested, assets frozen

“The FRC announces the initiation of enquiries and investigations … to protect the interests of shareholders and the investing public so as to maintain public confidence in our financial market and independent auditor regulation,” the council said in a statement.

The FRC investigation comes within a month of Next Digital’s disclosure to the stock exchange on July 22 that it had made an early loan repayment of HK$150 million (US$19.2 million) to Lai on April 1, which was much earlier than its due date.

The publisher has come under intense heat from authorities since China imposed the national security law in June last year. Lai, the former chairman of Next Digital, has been sentenced to jail under various charges, while several corporate and editorial executives have also been arrested.

The council will investigate whether Next Digital’s management had made any “material misstatement” about its cash position, impairment provisions and whether the company had disclosed the uncertainties it faced during the period under review.

With regards to Deloitte, the FRC will check whether it made sure Next Digital had adequate impairment provisions in the 2019 accounts. The FRC’s review of CCTH will focus on why it did not highlight the uncertainties faced by the company in 2020.

The FRC said it decided to investigate Next Digital after the company changed auditors three years in a row between 2019 and 2021, noting that they were replaced close to the end of the financial year. The investigation was also triggered by a referral from another regulator, which the council did not identify, as well as a complaint from a member of the public.

Next Digital, which has been suspended from trading since June 17 when the police arrested some of its key executives, missed its scheduled results announcement on June 28 for the year ended March, as its current auditor Tandem (HK) CPA said it needed more time to complete its job.

This article appeared in the South China Morning Post print edition as: Next Digital’s books and two auditors under investigation

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