A four-day audit at City Toys Ltd. in Shenzhen near Hong Kong was conducted after allegations in the South China Morning Post newspaper that it had employed underage workers and permitted overcrowded dormitories, according to McDonald's and its Los Angeles-based supplier, Simon Marketing Inc.

The audit failed to confirm the allegations of underage workers and overcrowded dormitories at the subcontractor to Simon Marketing, but it turned up violations of McDonald's code of conduct -- a requirement for all firms doing business with the Oak Brook, Illinois-based hamburger maker, McDonald's and Simon said.

Conducted by four independent international monitoring groups, the audit found wage and working-hour infringements of the code and other problems, such as insufficient training and poor lighting, the companies said.

``We're taking auditing very seriously,'' said McDonald's spokesman Walt Riker, noting that ``only a tiny percentage'' of Happy Meal toys were made at the City Toys factory. ``Our supplier will try to continue to work with this factory to bring them back into compliance.''

``Severing business ties is a last resort and we do not take it lightly,'' said McDonald's chief purchasing officer, Tom Albrecht, in a statement.

[Posted 9/08/2000]