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China Mobile beefs up supervision after audit finds accounting problems

A labourer works in front of a sign for China Mobile at the company's office in downtown Shanghai March 11, 2013. REUTERS/Carlos Barria
A labourer works in front of a sign for China Mobile at the company's office in downtown Shanghai March 11, 2013. REUTERS/Carlos Barria

(Reuters) - China Mobile Ltd, the world's biggest mobile operator by subscribers, said its unlisted parent is beefing up its internal supervision after a government audit office highlighted problems in accounting practices and internal management.

The report by China's National Audit Office comes at a time when the new Chinese leadership led by President Xi Jinping has made tackling corruption a top priority, warning that the problem is so serious it poses a threat to the party's survival.

Over the past few years, several executives and former executives of group parent China Mobile Communications Corp have been investigated by Chinese authorities for graft, according to Chinese media reports.

Earlier in May, the state-owned China Daily said Li Xinze, general manager of China Mobile in the southern province of Guangdong, became the 13th senior executive from the company to be placed under investigation.

China Mobile did not respond to emails from Reuters on these reports.

In the report by the National Audit Office issued on Friday, the government said it audited the group parent's 2011 results and identified problems that included inflated sales and unaccountable receipts.

"The accounting information basically reflected the company's accounting and operations accurately, but there are also inadequate supervision of its units and imperfections in its integrity and system," the audit office said.

For example, its Inner Mongolia and Fujian offices amassed fake and unaccountable receipts totaling around $100 million from 2009 to 2011, while some units inflated sales figures by tens of millions of dollars between 2005 and 2011.

"The board of directors and senior management of the company have attached great importance to the problems regarding the group identified in the audit, drawn up and proactively executed detailed rectification measures and plans," China Mobile Ltd said in a statement on the Hong Kong stock exchange.

"At present, except for a particular matter that has not yet been executed pending approval by regulatory authorities, the rest of the problems identified in this audit have already been rectified and the relevant responsible persons have been dealt with in a serious manner."

The carrier did not specify what the particular matter was.

China Mobile Ltd said the problems in the audit would not have any material impact on its overall operating results and financial statements.

The announcement came during the lunch break of Hong Kong markets.

China Mobile Ltd's Hong Kong shares, valued at more than $220 billion, traded flat in late trade, slightly outperforming the Hang Seng Index's 0.07 percent fall.

(Reporting by Lee Chyen Yee; Editing by Matt Driskill)

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