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The Hong Kong court trial of Leung Sze-chit, suspended senior manager of KPMG, started on March 28 for accepting HK$400,000 for himself and his assistant in July 2009 from Fujian-based fabric maker Hontex International Holdings, reports the South China Morning Post.

According to the newspaper, the cash gift was given to Leung and Suki Lau Shuk-ting to allegedly overlook accounting errors in the listing prospectus of Hontex in Hong Kong.

At the trial, Lau, who no longer trusted her boss, testified that she reported the matter to KPMG's risk management department and handed back the money to the department.

Following an internal investigation, Leung admitted that he had accepted the HK$100,000 for Lau and he himself received HK$300,000 from Chan Chau-wan, a consultant engaged by Hontex for the listing. Leung handed the money to KPMG, reports the Post.

KPMG reported the case to the Independent Commission Against Corruption, which arrested Leung last May. The accounting firm removed itself as auditor for Hontex that month.

Hontex stocks traded for only 64 days before the Securities and Futures Commission in March last year suspended trading. The company had raised HK$1 billion in its IPO in 2009.

Our previous coverage of the Hontex scandal and KPMG's role can be found here.

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