Month: April 2015

Proxy adviser ISS calls for Noble Group audit committee overhaul

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http://www.ft.com/intl/cms/s/0/b4757c62-e1e3-11e4-bb7f-00144feab7de.html#axzz3XG1alqnD

http://www.reuters.com/article/2015/04/13/us-noble-group-shareholders-iss-idUSKBN0N40ID20150413

Mon Apr 13, 2015 6:37am EDT

Proxy adviser ISS calls for Noble Group audit committee overhaul

SINGAPORE | BY ANSHUMAN DAGA

(Reuters) – Influential proxy adviser Institutional Shareholder Services (ISS) has called for major changes to Singapore-listed Noble Group’s audit committee, weeks after the commodity trader denied claims of improper accounting made by Iceberg Research. Continue reading →

Accounting-Driven Class Actions Rising: Twenty of the accounting-related class actions included allegations of improper revenue recognition, PwC finds

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http://ww2.cfo.com/legal/2015/04/accounting-driven-class-actions-rising-study-finds/

Accounting-Driven Class Actions Rising, Study Finds

Twenty of the accounting-related class actions included allegations of improper revenue recognition, PwC finds

Katie Kuehner-Hebert

April 10, 2015 | CFO.com | US

Now that securities litigation related to the 2008 financial crisis has largely petered out, accounting-driven class-action suits based on regulatory enforcement actions are on the rise, according to PwC’s 2014 Securities Litigation Study released Friday. There were 53 accounting-driven cases filed last year, representing 31% of all federal securities class-action cases filed during the year, according to the report. In 2013, 46 cases were filed, representing 29% of all cases that year. PwC tracks U.S. federal securities class-actions filed since the passage of the Private Securities Litigation Reform Act in 1995.

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China Environment FY2014: Significant Deterioration in Receivables Collectability And No Provision for Impairment

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By Roy KIM Jia Liang and KB Kee

China Environment (SES: 50U, Bloomberg: CENV SP) FY2014:

  • Receivables past due more than 90 days exploded from RMB90m in FY13 (17% of sales, 12% of current assets) to RMB306m (52.4% of sales, 34% of current assets) in FY14, with no provision for impairment. Cash and Cash Equivalents down from RMB90.3m in FY13 to RMB8.8m in FY14.
  • Notice how the “trade receivables not past due” (“deposits with bank”?) amounting to RMB297m eerily approximates the sum of Amount due to related parties RMB86.6m, Short-term borrowings RMB173.4m and Bank balances pledged RMB39.5m. Are these circular money-go-round transactions in money pledged to give loan guarantees and loans to related-parties?
  • Overall: Further doubts are cast on the propriety and reliability of receivables and revenue figures with the potential risk of undisclosed related-party transactions severely misrepresenting the financial status of the company.
  • Chronology of events:
  1. Feb 10, 2015: Part 1 of article series on China Environment highlighting accounting and governance issues. Part 2 on Feb 17, Part 3 on Feb 23.
  2. Feb 16, 2015: CFO CT Chiar replied using the moniker “Sadme” and a personal email (zzh721@yahoo.com).
  3. Feb 27, 2015: Unaudited FY14 financial results announcement with 4Q14 sales and profit witnessing a sudden plunge, corresponding with a sharp decrease in cash and a sudden increase in “Other Receivables (Unsecured, Interest-Free Advances to Unidentified Mysterious Subcontractor With No Provision for Impairment to Mitigate Default or Non-Repayment Risk)”.
  4. Mar 9, 2015: 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.
  5. Apr 2, 2015: Auditor Emphasis of Matter and the partial repayment (disgorging?) of cash taken out from the listco. Read: (1) China Environment: Auditor Emphasis of Matter raises more questions on potential accounting tunneling risk, (2) Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk? “Emphasis of matter” language predicts restatements,
  6. Apr 13, 2015: Receivables past due more than 90 days exploded.

CEL_Aging Receivables Continue reading →

PCAOB Preparing New Rule for Audits of Accounting Estimates

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http://ww2.cfo.com/auditing/2015/04/pcaob-preparing-new-rule-audits-accounting-estimates/

https://tax.thomsonreuters.com/media-resources/news-media-resources/checkpoint-news/daily-newsstand/proposal-may-issued-address-auditors-responsibility-accounting-estimates/

PCAOB Preparing New Rule for Audits of Accounting Estimates; The PCAOB staff plans to discuss auditors’ responsibilities for accounting estimates with the Standing Advisory Group in June.

Matthew Heller

April 9, 2015 | CFO.com | US

The Public Company Accounting Oversight Board is moving closer to proposing a comprehensive new standard for audits of accounting estimates in financial statements. Thomson Reuters reports that according to the standard-setting agenda the board updated on March 31, PCAOB staff is planning to discuss auditors’ responsibilities for accounting estimates with the Standing Advisory Group in June.

Continue reading →

Vietnam Police Arrest Executives of Truong Son Securities for ‘fraud, appropriation of assets’, lengthening the list of crimes in the country’s financial system.

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Vietnam Police Arrest Executives of Truong Son Securities

23 March 2015

Vietnam News Brief Service

Vietnamese investigative police on March 21 detained two former high-profile executives of Truong Son Securities Incorporation (TSS) for ‘fraud, appropriation of assets’, lengthening the list of crimes in the country’s financial system. Continue reading →

‘Audit firms need to be put under lens’

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http://indianexpress.com/article/business/business-others/audit-firms-need-to-be-put-under-lens/

‘Audit firms need to be put under lens’

Sandeep Singh

10 April 2015

Indian Express

As a special court sentenced B Ramalinga Raju, chairman of erstwhile Satyam Computers, to 7 years in jail along with a Rs 5 crore penalty and holding two former partners of its auditing firm Price Waterhouse accountable in the fraud case, regulatory officials, who were involved with the case, said that accounting firms should also be held accountable.

“Nothing has happened to the audit firm because, in India, while institutions have disciplinary powers over individuals, they can do nothing to the firm and this needs to be looked into. In developed nations accounting firms have been held accountable,” said a former Sebi official. He added: how can the firm justify the fact that the auditor did not raise issues even as accounts were manipulated for 28 quarters? Continue reading →

Predicting Large Negative Stock Returns: The Trouble Score

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589272

Predicting Large Negative Stock Returns: The Trouble Score

  1. Korcan AkUniversity of California, Berkeley – Haas School of Business
    April 6, 2015

Abstract: 
The purpose of this study is to predict large negative stock returns. I create an indicator variable, which takes the value of one when a company experiences a stock price decline of 50 percent or more over the subsequent year. Then, using both accounting-based and market-based variables, I predict this large change by using a logit model; the outcome of this prediction is the “Trouble Score”. The top three deciles of the T-Score correctly classify 63.00 percent of observations for the in-sample tests and 60.52 percent of observations for the out-of-sample period. Further, I document a significant and negative association between the out-of-sample T-Score and future stock returns even after controlling for well-known risk factors and control variables that are correlated with future stock returns.

Spotting lies, and the lying liars who layer them; Muddy Waters engaged behavioral analysis firm Qverity to analyze management’s statements on the February 26th Q4 2014 results call for deception; Noble Group: Muddy Waters Concerns Over Fair Value Gains “Valid,” Says UBS

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http://ftalphaville.ft.com/2015/04/09/2126069/spotting-lies-and-the-lying-liars-who-layer-them/

http://blogs.barrons.com/asiastocks/2015/04/10/noble-group-muddy-waters-concerns-over-fair-value-gains-valid-says-ubs/?mod=BOL_hp_blog_astw

Spotting lies, and the lying liars who layer them

Dan McCrum

| Apr 09 13:11 | 10 comments | Share

Can you spot a lie? What about a half-truth, a sin of omission or the telling smirk of someone who thinks they got away with it? How about the grand lie, so big it has pillars and caverns of mis-truth, or the subtle wave of misdirection? Short sellers like to look for lies, in company accounts or in what management say. Find one, stick a red flag in it and go looking for more, on the basis if there’s one there’s several: lies multiply. There is also a small cottage industry in the art of deception, from books of facial expressions to help you play poker all the way to ex-CIA consultants offering interrogation advice.

For instance, the latest report from Muddy Waters on the commodity trading group Noble, which includes some “third party behavioural analysis” of management statements. Muddy Waters engaged Qverity to analyze management’s statements on the February 26th Q4 2014 results call for deception. (The call is the only time Noble management has spoken extemporaneously in public about the recent criticism.) Qverity provides behavioral analysis, and is founded and staffed by former United States Central Intelligence Agency experts in detecting deception. Its principals authored the books “Spy the Lie” and “Get the Truth”. Continue reading →

Winsway (1733 HK) Missed Bond Payment Heightens Chinese Default Risk

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http://www.bloomberg.com/news/articles/2015-04-09/winsway-misses-dollar-bond-payment-as-asia-coal-distress-deepens

Winsway Missed Bond Payment Heightens Chinese Default Risk

byDavid Yong

April 9, 2015

Investors in coal-related companies face heightened default risks after one that relies on markets in China and Mongolia became the latest Chinese corporate to miss an interest obligation.

Winsway Enterprises Holdings Ltd., an importer of coal for steelmakers, didn’t make a $13.15 million semi-annual coupon payment due Wednesday on $309.3 million of notes maturing in April 2016, according to a stock exchange filing. It plans to use a 30-day grace period to discuss restructuring the debt after hiring Akin Gump Strauss Hauer & Feld LLP as a legal adviser to an expected group of bondholders. Continue reading →

Ex-Keangnam chief found dead in suicide; He allegedly embezzled 25 billion won from the fund and was engaged in fraudulent accounting to the tune of 950 billion won

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http://www.koreatimes.co.kr/www/news/nation/2015/04/116_176833.html

Updated : 2015-04-09 18:46

Ex-Keangnam chief found dead

Probe into energy projects expected to hit wall
By Lee Kyung-min

Former Keangnam Enterprises Chairman Sung Woan-jong was found dead on Mt. Bukhan in an apparent suicide, Thursday. He has been at the center of an investigation into the failed “energy diplomacy” of the previous Lee Myung-bak administration. Continue reading →