The Nasdaq Exchange has halted trading in Luckin Coffee shares on April 7th after a nearly 80% plunge triggered by the company’s alleged fraud. While some investors are seeking to file lawsuits against Luckin, the public is questioning whether Ernst & Young Hua Ming LLP, Luckin’s auditor, is jointly liable.
Professor Li Ruoshan from Fudan University School of Management points out that, what EY has published are actually reviews of Luckin’s quarterly financial statements, instead of an audit report. The public needs to understand that a review only provides limited assurance and is substantially narrower in scope than an audit, involving no investigation in the listed company’s internal control or potential fraud. Meanwhile, EY shouldn’t be blamed for declining to make comments on the fraud to the media either, as they are strictly bound by the confidentiality principle.
