HONOLULU -- The state auditor is recommending the removal of Ted Liu as director of the Department of Business and Economic Development and Tourism.

In a critical audit of DBEDT, auditor Marion Higa said the department filed false financial reports and spent lavishly on a trade mission to China in 2005.

Liu called the charges erroneous.

"I would say this report, she has crossed the line. On the federal program she bases allegations we have violated guidelines, she's wrong," Liu said.

"The legislative auditor’s report of DBEDT offers erroneous findings and demonstrates a lack of understanding and appreciation of the critical role Hawai‘i’s overseas offices in Beijing and Taipei play in the economic future of our state," Gov. Linda Lingle said in a written statement.