Month: February 2015

Flamboyant Malaysian Jho Low’s real-estate deals in shell companies connected to Prime Minister Najib called into question

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http://www.nytimes.com/2015/02/09/nyregion/jho-low-young-malaysian-has-an-appetite-for-new-york.html

Posted by Valerie NG, Year 3 undergrad at the School of Accountancy, Singapore Management University

Flamboyant Malaysian’s real-estate deals called into question

NEW YORK — In early 2010, a young Malaysian financier named Mr Jho Low began making some very expensive real-estate deals in the United States.

FEBRUARY 10

NEW YORK — In early 2010, a young Malaysian financier named Mr Jho Low began making some very expensive real-estate deals in the United States. First, a shell company connected to Mr Low, famous back home for partying with the likes of American socialite Paris Hilton, bought a US$24 million (S$32.5 million) apartment in the Park Laurel condominiums in Manhattan. Three years later, that shell company sold the condo to another shell company, this one controlled by someone even more prominent in Malaysia: The film-producing stepson of the Prime Minister. Continue reading →

[Flashback] China foreign listings dogged by scandal

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http://www.ft.com/intl/cms/s/0/9b70a976-8f8a-11e0-954d-00144feab49a.html#axzz3RKU6E8m7

Posted by LIM Hui Jie, Year 4 undergrad at the School of Economics, Singapore Management University

Like any emerging market, China has its fair share of fraud, scams and corporate governance fiascos. But a spate of scandals at Chinese companies listed in New York, Hong Kong and Toronto is increasingly unsettling investors.

Continue reading →

[Flashback] Financial discrepancies at FibreChem uncovered

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http://www.valuebuddies.com/thread-1706.html

Posted by CHEN Liting, Year 3 undergrad at the School of Accountancy, Singapore Management University

Business Times – 28 Dec 2011

Missing HK$777m, unauthorised share transfer among nTan’s findingsBy LYNETTE KHOO

THREE years of investigations have uncovered several financial and accounting irregularities at FibreChem Technologies, including an unauthorised share transfer and HK$777 million (about S$130 million) in missing cash.

Continue reading →

SEC Distressed Asian Company Watch List with Going-Concern Opinion + Earnings Manipulation in Failing Firms

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Distressed Company Watch List; See which companies have recently indicated doubt about continuing as going concerns in SEC filings

By Allison Collins, 3 February 2015

Companies                                      Description

ACL Semiconductors Inc.                        Hong Kong-based ACL Semiconductors Inc. manufactures dynamic random access memory products for computers, digital cameras and other products

ADGS Advisory Inc.                             ADGS is a Hong Kong-based accounting and advisory firm

Amaru Inc.                                     Amaru, headquartered in Singapore, provides interactive entertainment on demand through its subsidiaries

American Nano Silicon Technologies Inc.        American Nano is a Sichuan, China-based nano-technology chemical manufacturer

China Ginseng Holdings Inc.                    Changchun City, China-based China Ginseng farms, processes and distributes ginseng

China Shianyun Group Corp. Ltd.                China Shianyun, headquartered in Shenzhen, China, makes and sells consumer goods, including teas, liquors, meal replacement products, eggs and cured meats

China Teletech Holding Inc.                    Tallahassee, Fla.-based China Teletech provides telecommunications services in China

Cleantech Innovations Inc.                     China-based Cleantech Innovations manufactures structural towers for wind turbines

Comjoyful International Co.                    Beijing, China-based Comjoyful is a holding company

Cord Blood America Inc.                        Cord Blood, headquartered in Las Vegas, provides private cord blood and cord tissue stem cell storage

Fuwei Films (Holdings) Co. Ltd.                Weifang Shandong, China-based Fuwei makes plastic film used for packaging and other uses

Leo Motors Inc.                                Leo Motors is a Korean company that manufactures electric vehicles

Network CN Inc.                                Hong Kong-based Network CN is an advertising company

Suwin Stevia International Inc.                Shandong, China-based Sunwin sells stevioside, a natural sweetener, and herbs used in Chinese medicines and veterinary products

Tongji Healthcare Group Inc.                   Guangxi, China-based Tongji Healthcare operates a hospital in China

Usmart Mobile Device Inc.                      Kowloon, Hong Kong-based Usmart makes memory technology products

Company Watch List has indicated in a filing with the U.S. Securities and Exchange Commission in the previous 12 months doubt about its ability to continue as a going concern. A company can be removed from the list if it is acquired, if it files for bankruptcy protection or if it indicates a change in status.

http://eds.b.ebscohost.com.libproxy.smu.edu.sg/ehost/pdfviewer/pdfviewer?sid=ad5c1b3e-838d-4ff1-9d23-ea0734483846%40sessionmgr198&vid=0&hid=122

Earnings Manipulation in Failing Firms

ROSNER, REBECCA L.1

Contemporary Accounting Research. Summer2003, Vol. 20 Issue 2, p361-408. 48p. 2 Diagrams, 10 Charts.

Abstract:

Prior literature and anecdotal evidence, most recently provided by allegations relative to Enron, Global Crossing, and WorldCom, suggest that failing firms (defined here as prebankruptcy firms) may be motivated to engage in fraudulent financial reporting to conceal their distress. I examine two research questions: (1) Are failing firms’ prebankruptcy financial statements more likely to exhibit signs of material income increasing earnings manipulation than those of nonfailing firms? (2) Do auditors detect the overstatements in firms that they perceive to be failing? I predict and find that as (ex post) bankrupt firms that do not (ex ante) appear to be distressed approach bankruptcy, their financial statements reflect significantly greater material income-increasing accrual magnitudes in nongoing-concern years than do control firms. The accrual behavior of these firms resembles that of bankrupt firms that the Securities and Exchange Commission (SEC) has sanctioned for fraud. Like sanctioned firms, the nonstressed bankrupt firms display significantly greater (material) increases in receivables; inventory; property, plant, and equipment; sales; net working capital, current, and discretionary accruals in prebankruptcy nongoing-concern years than do control firms. They also display significantly more negative changes in cash flows from operations and net cash and a greater disparity between accrual-based net income and operating cash flows than do control firms, consistent with Lee, Ingram, and Howard 1999. Finally, I predict and find that these firms’ going-concern years reflect evidence consistent with auditor-prompted reversal of previous overstatements. These results are based on parametric and nonparametric tests for various subsample combinations drawn from a sample of 293 bankrupt firms representing approximately 2,500 observation

Corporate frauds in India – perceptions and emerging issues

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http://www.emeraldinsight.com.libproxy.smu.edu.sg/doi/pdfplus/10.1108/JFC-07-2013-0045

Corporate frauds in India – perceptions and emerging issues.

Gupta, P. K.1 pkg123@eth.net
Gupta, Sanjeev2

Journal of Financial Crime. 2015, Vol. 22 Issue 1, p79-103. 25p.India Securities Scams Continue reading →

[Flashback] China accounting scandals put Big Four auditors on red alert

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http://www.reuters.com/article/2011/06/24/us-china-accounting-idUSTRE75N19J20110624

Posted by Valerie NG, Year 3 undergrad at the School of Accountancy, Singapore Management University

Valerie:  Majority of the accounting frauds in the U.S. originates from small Chinese companies which become listed through a reverse takeover. While these companies are mostly audited by smaller accountancy firms in the States or Hong Kong, there are an increasing number of high profile scandals in which the Chinese companies in question were audited by the Big Four. According to the author, by auditing in China, the Big Four are exposing themselves to even more high profile accounting scandals, which could tarnish their reputation. This brings to mind the recent fine of $2m that the Big Four had to fork out collectively to SEC for failing to hand over audit documents of Chinese companies that SEC was investigating on. The dilemma that the Big Four faced was that China treats audit paperwork somewhat like sovereign secrets. Therefore, by deciding to audit in China, the Big Four have to weigh the risks of breaking China’s secrecy law or the States’ securities law. ​

China accounting scandals put Big Four auditors on red alert

Fri, Jun 24 2011

By Rachel Armstrong

HONG KONG (Reuters) – The string of accounting problems and stock plunges at publicly traded Chinese groups has sparked deep concerns across the world’s biggest audit firms, putting the so-called Big Four on alert from worries that their reputation could be brought down along with a growing list of stricken companies. Continue reading →

[Flashback] Warren Buffett Does A Beautiful Job Of Explaining Dividends, And Why Berkshire Isn’t Paying One

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http://www.businessinsider.com/warren-buffett-on-dividends-2013-3?IR=T&#ixzz3R9RcBly0

Posted by CHEN Tiancheng , Year 4 undergrad at the School of Accountancy, Singapore Management University

Back in September 2011, Warren Buffett announced that Berkshire Hathaway would be buying back shares of the company.

At the time, some people went after Buffett for not offering a cash dividend. Continue reading →

Corporate Ownership, Debt, and Expropriation: Evidence from China

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http://www.cba.uri.edu/research/workingpapers/documents/2011/WP14_2011.pdf

Posted by Hannah YAP Qing, Year 4 undergrad at the School of Accountancy, Singapore Management University

Corporate Ownership, Debt, and Expropriation: Evidence from China

Yunxia Bai, Bing-Xuan Lin, Yaping Wang, Liansheng Wu Guanghua

Abstract

We provide direct evidence on the dark side of leverage and offer new insights regarding the role of debt in corporate governance. Using a sample of Chinese state-owned enterprises that have experienced a transfer of controlling rights, we find a positive and significant relationship between expropriation and debt usage. Firms controlled by private block shareholders tend to have higher leverage due to excessive expropriation via debt. The evidence we document also suggests that in a weak legal environment, privatization alone will not resolve the agency problem faced by minority shareholders. On the contrary, the agency problem between the controlling shareholder and minority shareholders escalates after privatization.

Diamond Foods, Inc.: Anatomy and Motivations of Earnings Manipulation

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http://eds.a.ebscohost.com.libproxy.smu.edu.sg/ehost/pdfviewer/pdfviewer?sid=4f4ea990-97e1-4ae0-a161-e0afbf4de5d0%40sessionmgr4002&vid=1&hid=4211

Diamond Foods, Inc.: Anatomy and Motivations of Earnings Manipulation.

Gujarathi, Mahendra R.1,2

Issues in Accounting Education. Feb2015, Vol. 30 Issue 1, p47-69. 23p. 6 Charts, 3 Graphs.

Abstract:

Diamond Foods is America’s largest walnut processor specializing in processing, marketing, and distributing nuts and snack products. This real-world case presents financial reporting issues around the commodities cost shifting strategy used by Diamond’s management to falsify earnings. By delaying the recognition of a portion of the cost of walnuts acquired into later accounting periods, Diamond Foods materially underreported the cost of sales and overstated earnings in fiscal 2010 and 2011. The primary learning goal of the case is to help students understand the anatomy and motivations of earnings manipulation. Specifically, students will have the opportunity to (1) apply the FASB’s Conceptual Framework to a real-world context, (2) determine the nature of errors and compute their numerical effects on financial statements, (3) understand motivations for earnings management and actions needed for managing earnings of future years, (4) explain the anatomy of financial reporting fraud by reconstructing journal entries, (5) prepare comparative financial statements for retroactive restatements, (6) explain the rationale for clawback provisions in compensation contracts, and (7) understand the difference between the real and accrual-based earnings management.

[Flashback] Small business fraud and the trusted employee

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http://www.acfe.com/article.aspx?id=4294976289

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

Small businesses have it rough. They’re particularly vulnerable to fraud because they lack the resources to implement complete systems of internal controls and properly segregate accounting duties among their limited staffs. However, small businesses don’t have to be rife with fraud. Here are some viable prevention options. Continue reading →