Auditors exit and CFO quits as SEC probes Longtop

Auditors exit and CFO quits as SEC probes Longtop

China's Longtop Financial Technologies says it is the subject of a probe by the Securities and Exchange Commission over alleged financial irregularities, and has confirmed the resignation of its chief financial officer Derek Palaschuk and auditors Deloitte Touche Tohmatsu.

Longtop has been facing scrutiny following the recent release of a report by Citron Research, which accused the company of dubious business practices and of having 'supersized margins'.

Longtop says CFO Palaschuk tendered his resignation last week. Earlier this month, Palaschuk quit the audit committee of Chinese social networking site Renren just ahead of its IPO, saying he wanted to insulate the firm from accusations of accounting fraud at Longtop.

The resignation of DTT as Longtop's independent auditor is a further blow to the firm. In a statement, DTT says its exit was prompted by uncertainty about the company's bank statements and sales revenue; the "deliberate interference" by certain members of Longtop management in DTT's audit process; and the "unlawful detention" of DTT's audit files.

DTT warned that "continued reliance should no longer be placed on DTT's audit reports on the previous financial statements", and declined to be associated with any of the company's financial communications in 2010 and 2011.

Longtop's Audit Committee has retained US legal counsel and authorised the retention of forensic accountants to conduct an "independent investigation into the matters raised by DTT's resignation letter".

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