Chinese sewage treatment firm Sound Global (967 HK)’s credit ratings cut on weak governance, two days after the Beijing-based firm said it had “potential audit issues” and would set up an independent review committee that might engage forensic accountants to look into them, despite denying recent allegations from research firm Emerson Analytics that it had faked and inflated revenues in the past few years

http://www.scmp.com/print/business/china-business/article/1754612/chinese-sewage-treatment-firm-sound-globals-credit-ratings

Chinese sewage treatment firm Sound Global’s credit ratings cut on weak governance

Thursday, 02 April, 2015, 10:01pm

Eric Ng eric.mpng@scmp.com

Ratings agencies have downgraded mainland sewage treatment firm Sound Global, citing governance deficiencies and internal controls concerns.

This comes two days after the Beijing-based firm said it had “potential audit issues” and would set up an independent review committee that might engage forensic accountants to look into them, despite denying recent allegations from research firm Emerson Analytics that it had faked and inflated revenues in the past few years. Continue reading

China’s leading over-the-counter exchange cracks down on illegal trading

http://www.scmp.com/print/business/money/markets-investing/article/1754620/chinas-leading-over-counter-exchange-cracks-down

China’s leading over-the-counter exchange cracks down on illegal trading

Thursday, 02 April, 2015, 9:30pm

Reuters in Shanghai

Beijing’s New Third Board to investigate ‘ultra-high’ price quote on fears of overheating

The mainland’s leading over-the-counter (OTC) equity exchange is cracking down on illegal trading, with concerns growing that the market, which is aimed at small, high-growth firms and private equity investors, is overheating. Continue reading

China Taifeng Beddings (873 HK): Typical Misleading “Value Stock” with “Low” PE and P/B Ratios – Delay in Publication of 2014 Annual Results Due to Audit Failure in Ascertaining Fair Value of Financial Guarantee Contracts on Borrowings of Subsidiary and Impairment of the Recoverable Amounts of the Group’s Assets

Related posts: (1) Related posts: Qinfa (866 HK): Belated Audit Qualification on Accounting Tunneling Fraud (Auditor KPMG) (2) Open Letter to SGX/MAS: Reply to CFO of SGX-Listed China Environment (CENV SP) on report “Potential Accounting Tunneling Fraud at China Environment?” – Address the accounting and governance concerns in an SGX/MAS announcement

(873) China Taifeng Beddings Holdings Limited: China Taifeng Beddings Holdings Limited delayed announcing its annual results to on or after 21 April 2015.

DELAY IN PUBLICATION OF THE 2014 ANNUAL RESULTS ANNOUNCEMENT The Board wishes to inform the Shareholders the reasons for the delay include that the Company needs more time to ascertain (a) the fair value of the financial guarantee contracts given to banks on certain borrowings of its subsidiary, Shandong Taifeng Textile Co., Ltd. (“Shandong Taifeng”) given to independent third parties; (b) the fair value assessments of the estimation of the recoverable amounts of the Group’s assets which may be impaired as a results of the latest financial position of the Company which will not be available by 31 March 2015; and (c) auditor of the Company has indicated that more time is required to ascertain the cash flow position of the Company and carry out additional work in order to finalise the audit of the consolidated financial statements of the Group for the year ended 31 December 2014 as a result of the latest situation of the Company including the liquidity position of the Company as disclosed in the Company’s announcement dated 12 December and 15 December 2014 respectively. As a result, the publication of the 2014 Annual Results will be delayed, which delay constitutes non-compliance with Rule 13.49(1) of the Listing Rules. The Board and the management of the Company are doing their utmost to assist and cooperate with the Auditors so that the 2014 Annual Results can be available as soon as practicable.

NON-PUBLICATION OF MANAGEMENT ACCOUNTS Rule 13.49(3) of the Listing Rules provides that where an issuer is unable to issue its preliminary results, it must announce its results based on the financial results which have yet to be agreed with the auditor (so far as the information is available). The Board has decided, after due and careful consideration, that it would not be appropriate for the Company to publish the unaudited management accounts of the Group for the year ended 31 December 2014 (the “2014 Unaudited Management Accounts”) at this time as it is expected that there may be significant adjustment on the 2014 Unaudited Management Accounts and hence the 2014 Unaudited Management Accounts do not truly and fairly reflect the financial performance and position of the Group. The Board is therefore of the view that the publication of the 2014 Unaudited Management Accounts at this time would be misleading and confusing to the Shareholders and potential Investors.

The Ties that Bind: The Decision to Co-Offend in Fraud

http://onlinelibrary.wiley.com.libproxy.smu.edu.sg/doi/10.1111/1911-3846.12063/epdf

The Ties that Bind: The Decision to Co-Offend in Fraud

Clinton Free1 and Pamela R. Murphy2

Contemporary Accounting Research

Volume 32Issue 1pages 18–54March 2015

It is frequently observed that fraud has a greater economic impact on society than any other category of crime. Arguing that both research and practitioner frameworks in auditing and forensic accounting have tended to adopt an individualizing perspective predicated primarily on solo offending, this article adopts an inductive approach to consider why individuals co-offend in fraud. It reports the results of a set of interviews with 37 individuals convicted of a range of frauds including financial statement fraud, insider trading, credit card fraud, money laundering, and asset misappropriation. In each instance, the fraud was perpetrated by a group of two or more co-offenders. Based on inductive, exploratory case coding, we find that reasons for co-offending vary according to the type of bond that exists between co-offenders. Two dimensions of fraudulent co-offending are identified—the primary beneficiary of the fraud and the nature of group attachment—to derive three distinct archetypes of bonds between co-offenders: (1) individual-serving functional bonds, (2) organization-serving functional bonds, and (3) affective bonds. Key elements of each archetype as well as their impact on the decision to co-offend are examined. Our findings suggest that the social nature of fraud is not merely an incidental feature of the crime but is instead a potential key to understanding its etiology and some of its distinctive features. They also support the need for diagnostic tools to move beyond individualistic analyses of fraud toward a broader, group-sensitive assessment of fraud risk.

Trading Behavior Prior to Public Release of Analyst Reports: Evidence from Korea

http://onlinelibrary.wiley.com.libproxy.smu.edu.sg/doi/10.1111/1911-3846.12090/epdf

Trading Behavior Prior to Public Release of Analyst Reports: Evidence from Korea

Bobae Choi1, Kooyul Jung2 and Doowon Lee1

Contemporary Accounting Research

Volume 32Issue 1pages 105–138March 2015

Abstract

This paper investigates information leakage from analyst reports prior to their public release. Previous studies document abnormal trading by institutions or short selling before announcement of recommendation changes. Such prerelease abnormal trading is interpreted as evidence of information leakage from analyst reports. However, if sophisticated investors obtain information similar to what analysts have from other sources, abnormal prerelease trading patterns would be observed even if there were no information leakage from analyst reports. This paper, using a unique data set from Korea, aims to determine whether a direct causal link between recommendation changes and prerelease trading exists, by comparing trading behavior of client investors with non-client investors. We find that abnormal prerelease trading by client investors, especially client institutions, is earlier in timing and greater in magnitude than that of other investor groups, supporting the information leakage hypothesis. We further find that net buying by client institutions and client large individuals is positively associated with firm, analyst, and earnings forecast change variables that influence formulation of recommendation changes and their impacts.