[Flashback] Eyebrows Go Up as Auditors Branch Out

http://www.wsj.com/articles/SB10001424127887324705104578149222319470606

Posted by Katharine TAN Pei Shi, Year 4 undergrad at the School of Accountancy, Singapore Management University

Auditing wasn’t all Deloitte LLP did for Autonomy Corp., the software firm recently accused of accounting improprieties by its parent company. To many observers, that sort of multitasking is potentially an industry problem.
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[Flashback] Interview with Bing Lin, Keywise Capital Management

http://www.chinamoneynetwork.com/2014/04/16/bing-lin-accounting-abuse-among-listed-chinese-companies-still-widespread

Posted by Terence CHUA Tong Liang, Year 4 undergrad at the School of Business, Singapore Management University

Below is the interview done by China Money Podcast with guest Bing Lin, portfolio manager at Hong Kong-based US$1.4 billion-under-management Keywise Capital Management, who speaks about why he believes there are still many major overseas listed Chinese companies with fraudulent accounting practices, and how 2014 will be a great year for shorting certain overseas-listed Chinese stocks.
Q: China announced plans to launch a Shanghai-Hong Kong stock connect pilot program in six months. How will this impact hedge funds investing in the Greater China region?
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Substitution between Real and Accruals-Based Earnings Management after Voluntary Adoption of Compensation Clawback Provisions

http://eds.b.ebscohost.com.libproxy.smu.edu.sg/ehost/pdfviewer/pdfviewer?sid=da8f73aa-0fdf-434f-a430-47cbcf6cafdd%40sessionmgr113&vid=0&hid=111

Substitution between Real and Accruals-Based Earnings Management after Voluntary Adoption of Compensation Clawback Provisions.

Chan, Lilian H.1Chen, Kevin C. W.2 Tai Yuan Chen2 Yangxin Yu3

Accounting Review. Jan2015, Vol. 90 Issue 1, p147-174. 28p. 5 Charts.

Abstract:

To deter financial misstatements, many companies have recently adopted compensation recovery policies–commonly known as ”clawbacks”–that authorize the board to recoup compensation paid to executives based on misstated financial reports. Clawbacks have been shown to reduce financial misstatements and increase investors’ confidence on earnings information. We show that the benefits come with an unintended consequence of certain firms substituting for accruals management with real transactions management (e.g., reduce research and development [R&D] expenditures), especially firms with strong incentives to achieve short-term earnings targets, such as firms with high growth or high transient institutional ownership. As such, the total amount of earnings management does not decrease subsequent to clawback adoption. We further show that although real transactions management temporarily boosts those clawback adopters’ short-term profitability and stock performance, this trend reverses after three years. In summary, clawbacks may have unexpected effects for a subset of firms whose managers are under greater pressure to meet earnings goals.

Mutual Fund Billionaire Accused of Fraud in Suit; lawsuit claims that Charles B. Johnson concealed $146 million in Franklin Resources shares that were intended to go to the heir of an early investor

http://dealbook.nytimes.com/2015/01/14/suit-accuses-franklin-resources-billionaire-of-defrauding-investors-heir/?ref=business&_r=0

Mutual Fund Billionaire Accused of Fraud in Suit

By WILLIAM D. COHAN

JANUARY 14, 2015 3:21 PM January 14, 2015 3:21 pm 9 Comments

Charles B. Johnson built Franklin Resources, the publicly traded mutual fund business, into a juggernaut before he retired.Credit Robert Holmgren

Charles B. Johnson has been lauded for numerous accomplishments. He built Franklin Resources, the publicly traded mutual fundbusiness, into a juggernaut that has nearly $900 billion under management and a market value of about $34 billion. He is a highly respected philanthropist, recently pledging $250 million to Yale University, his alma mater. He is said, by Forbes, to be worth about $6.5 billion and is the largest single shareholder of the San Francisco Giants, the reigning World Series champions.

But now Mr. Johnson, 82, stands accused of helping defraud the heir of one of the earliest investors in Franklin Resources out of $150 million. Continue reading

Anonymous letter sparks off Malaysian-listed mTouche discovery of RM6.3m accounting fraud

http://www.thestar.com.my/Business/Business-News/2015/01/14/Anonymous-letter-sparks-off-mTouche-discovery-of-RM6pt3m-fraud/?style=biz

Anonymous letter sparks off mTouche discovery of RM6.3m fraud

Wednesday, 14 January 2015

By: ESTELLE TOH KAR INN

KUALA LUMPUR: mTouche Technology Bhd’s shares were untraded at 21.5 sen on Wednesday as the company provided details and lodged a police report over the possible financial irregularities concerning operating expenditure transactions totalling RM6.3m from February 2009 to October 2010 following an anonymous letter addressed to its audit committee. Continue reading

Founder Securities denies related company embezzled 2.8 billion yuan

http://www.scmp.com/print/business/companies/article/1679643/founder-securities-denies-related-company-embezzled-28-billion

Related news: (1) Founder Group executives held in graft probe following Zenith allegations that executives have committed insider trading, selling state assets, rigging stocks, as well as bribery and forgery of documents (Link)

(2) Court orders 3b yuan in Founder Securities assets to be frozen; Beijing Zenith has accused Founder Group directors of various crimes, including insider trading, money laundering, embezzling state assets, forging documents (Link)

Founder Securities denies related company embezzled 2.8 billion yuan

Wednesday, 14 January, 2015, 5:26pm

Toh Han Shihhanshih.toh@scmp.com

Mainland brokerage Founder Securities has denied reports its business was disrupted after a related company, Founder Finance, embezzled 2.8 billion yuan (HK$3.5 billion) from Founder Securities for “emergency” purposes, but said it would deposit an unspecified amount of money with Founder Finance. Continue reading