Proposed Draft Legislation on VIE Structures

Posted by CHEONG Wen Quan, Year 2 undergrad at the School of Business, Singapore Management University

Brief Summary

VIE structures are used by foreign companies to circumvent the ban on foreign ownership of sensitive Chinese assets. However, the Chinese Ministry of Commerce recently revealed a draft legislation that could change the way how Chinese regulators look at VIE structures. The main change focuses on who has control over the VIE rather than ‘ownership’. Eg. A VIE will be deemed to be foreign if foreign investors are in control (eg. >50% voting power) over the assets of the respective restricted sectors. Therefore, enough proof must be given to show that Chinese individuals or corporations have a majority control over the VIE, if not they will still be treated as foreign companies. The proposed rules may help reduce uncertainties for companies using the VIE structure as the foreign investors can now directly own parts of the Chinese assets.

Personal View

If this is passed, foreign investors may want to move out of a VIE structure. However, under the current VIE structure, Chinese individuals/owners technically own 100% of the assets in the VIE and are only bounded by contractual agreements between the foreign investors and themselves. Will the reluctance to give up this ownership act as an incentive and a catalyst for a sudden new wave of frauds to occur?

http://blogs.wsj.com/digits/2015/01/22/how-chinas-new-vie-rules-might-play-out/

How China’s New Foreign Investment Rules Might Play Out Continue reading

[Flashback] Asian fraud detection systems market estimated to grow to $268.0 million by 2018

http://www.wattpad.com/83643565-fraud-detection-market-in-asia-industry-trends

http://www.whatech.com/market-research-reports/press-release/consumer/37891-new-report-looks-into-asian-fraud-detection-systems-market-that-is-estimated-to-grow-to-268-0-million-by-2018

http://www.digitalmarket.asia/ozone-media-partners-with-fraud-detection-company-forensiq/

Posted by Latha Do NADARAJAN , Year 3 undergrad at the School of Accountancy, Singapore Management University

New report looks into Asian fraud detection systems market that is estimated to grow to $268.0 million by 2018

The Asian Fraud Detection Systems report defines and segments the concerned market in Asia with analysis and forecast of revenue. The fraud detection systems market in Asia is estimated to grow to around $268.0 million by 2018, at a CAGR of 5.5% from 2013 to 2018. Continue reading

[Flashback] India Seeks to Overhaul a Corporate World Rife With Fraud

http://dealbook.nytimes.com/2013/08/15/india-seeks-to-overhaul-a-corporate-world-rife-with-fraud/?_r=0

Posted by GOH Shu Qi, Year 3 undergrad at the School of Accountancy, Singapore Management University

MUMBAI, India — In the wake of global scandals involving kickbacks and accounting fraud, one unlikely country, India, is aiming to set a tone in overhauling its corporate oversight laws. This month, the nation’s upper house of Parliament passed the Companies Bill, 2012, sweeping legislation meant to overhaul auditing, impose stiffer penalties for fraud and create more government oversight of businesses. The lower house had passed the bill last year. Once India’s president, Pranab Mukherjee, signs it into law, it will replace India’s 57-year-old corporate legislation that critics say had failed to keep up with changes in business practices.

India, a nation notoriously rife with graft and bribery, was partly motivated to pass the legislation in the wake of an accounting scandal that has been called India’s Enron. In 2009, B. Ramalinga Raju, the chairman of a prominent outsourcing company, Satyam Computer Services, confessed to overstating company assets and earnings by more than $1 billion, and then resigned. The fact that one company could defraud shareholders of such a large sum despite regular audits made painfully obvious the need for greater oversight in corporate India. But some four years after that startling case, little change in corporate laws had taken place until now. Continue reading

Management Motive, Weak Governance, Earnings Management, and Fraudulent Financial Reporting: Malaysian Evidence

http://eds.a.ebscohost.com.libproxy.smu.edu.sg/ehost/pdfviewer/pdfviewer?sid=ac03be2a-1c9c-4391-b6fa-e0985566033f%40sessionmgr4004&vid=4&hid=4111

Posted by M Laavanya, Year 3 undergrad at the School of Accountancy, Singapore Management University

Management MotiveWeak GovernanceEarnings Management, and Fraudulent Financial ReportingMalaysian Evidence.

Hasnan, Suhaily1 Abdul Rahman, Rashidah2 Mahenthiran, Sakthi3

Journal of International Accounting Research. 2013, Vol. 12 Issue 1, p1-27. 27p. 1 Diagram, 8 Charts.

Abstract:

This study examines ten factors associated with fraudulent financial reporting (FFR) in Malaysian publicly listed companies. We hypothesize that three factors proxy for management rationalization, four factors proxy for management motives, and three factors proxy for the opportunity to commit fraud. Our sample consists of 53 fraud firms convicted of securities fraud and 53 no-fraud firms, all of which were listed on the Bursa Malaysia and have a complete set of data from 1996-2007. With regard to rationalization, we find that prior violations and founders on the board are positively and significantly associated with FFR. With regard to motive, we find that financial distress is positively and significantly associated with FFR while family ownership is negatively and significantly associated with FFR. Our opportunity for fraud proxies, multiple directorships, and audit quality are positively and significantly associated with FFR. Additionally, we find evidence of earnings management in the years leading up to FFR.