Corporate restructuring is bound to generate frictions. Even so, long-suffering shareholders in Hong Kong red chip Guangnan hardly expected to witness a public row between two of the world's leading accountancy firms KPMG and Deloitte Touche Tohmatsu.
Last month Deloitte withdrew its 1997 audited annual report. This is a highly unusual move that raises issues such as whether it's possible to withdraw a report that has been in the public domain for over a year to whether Guangnan should now be delisted for its lack of a continuous history of internationally audited reports.
The Guangnan saga is the latest in a number of unhappy experiences for investors in red chips - Chinese companies listed on the Hong Kong exchange. Transparency is a major problem with many mainland companies still regarding equity as an easy source of funds with few if any obligations. Yet international firms such as Deloitte, China's biggest auditor, seem unable to bring much light to bear on what really happens in many of the companies. The bankruptcy of Guangdong International Trade and Investment Corporation (GITIC) last year further unnerved investors who are now worried about possible contamination.
Guangnan, a food company, also hails from Guangdong, the Chinese province bordering Hong Kong.