We just released an update on China Harmony Auto Holding Limited (HKEX: 3836) (“Harmony” or the “Company”). On November 12, 2020 we published our Report on Harmony which highlighted evidence that Chairman Feng defrauded investors and fabricated Harmony’s financial statements. The next day Harmony responded (“Harmony’s Response”) with one of the most laughable rationales for auditor turnover we have ever heard.
Harmony claimed that it needed to divide the labor amongst more audit firms because Harmony’s growth was too much for one auditor to handle. Harmony needed a third auditor because it overworked its two other auditors, Ernst & Young and Zhonghui Anda CPA Limited. To think that a Big 4 auditor cannot handle additional audit work beyond its primary audit responsibilities is ridiculous. Especially when Harmony had zero business combinations in either 2018 or 2019 and only spent RMB 154 million on acquisitions so far in 2020.
Harmony’s Response failed to address any of the evidence presented in our Report. Harmony failed to consolidate operating expenses for its primary subsidiaries and failed to write down failed investments.
We remain short Harmony and believe its stock is worthless.