Auditor qualified opinions due to business complexity: A number of Bursa Malaysia-listed companies with small market capitalisation, including those with prominent shareholders like self-made tycoon Tan Sri Vincent Tan and businessman Datuk Tey Por Yee, saw their FY2014 financial accounts slapped with a “qualified” opinion by external auditors. Are financial shenanigans on the rise or have auditors turned more cautious following an explosion of mega financial fraud in recent years? Former stock market darling Transmile Group Bhd, whose investors include billionaire Tan Sri Robert Kuok, comes to mind.

Related post: Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk? “Emphasis of matter” language predicts restatements

Qualified opinions due to business complexity

By Yen Ne Foo

6 July 2015

The Edge Malaysia (Weekly)

A number of Bursa Malaysia-listed companies with small market capitalisation, including those with prominent shareholders like self-made tycoon Tan Sri Vincent Tan and businessman Datuk Tey Por Yee, saw their FY2014 financial accounts slapped with a “qualified” opinion by external auditors. Are financial shenanigans on the rise or have auditors turned more cautious following an explosion of mega financial fraud in recent years? Former stock market darling Transmile Group Bhd, whose investors include billionaire Tan Sri Robert Kuok, comes to mind. Continue reading

A US$39.7M Guarantee To A Firm Worth Less Than US$0.39M. What nobody has yet been able to explain is why and how the $39.7M bank guarantee cheque issued by Axis Bank, Mumbai, was tampered with. And who deleted the computer-printed name on the cheque in favour of a handwritten one.

http://www.outlookindia.com/article/a-252cr-guarantee-to-a-firm-worth-less-than-25-cr/294787

A 252-Cr Guarantee To A Firm Worth Less Than 2.5 Cr…

Meetu Jain

13 July 2015

Outlook (India)

The PAC on the 4G auction in 2010 is to take up the final CAG report. Will Reliance Jio get mired in the alleged collusion scandal in pan-India licences? When contacted, Reliance Jio says, “We have acquired all our spectrum at market prices through open and transparent bidding processes, the conditions for which were the same for all bidders.” But clearly, the last hasn’t been heard of this watered-down report. It remains to be seen what line the PAC, headed by Congress MP K.V. Thomas, takes. Will the BJP government take its so-called cold war with Mukesh Ambani to its logical conclusion? The second point raised by CAG made it to the final report. This was how the rules of the game were changed three years after the auction. As other telcos watched, voice services were suddenly allowed to be bundled on the same frequencies for those holding broadband wireless access (BWA) spectrum. In short, from being an internet service provider, Reliance Jio now became a full service provider. Moreover, this spectrum was given at 2001 rates in 2010. At least at this stage it seems DoT cannot be charged with collusion or dereliction. In response to a PIL, solicitor-general Ranjit Kumar had given an opinion for DoT: “No occasion can therefore be said to have arisen for DoT to inquire into the transaction between IBSPL and RIL unless there was any complaint/material with DoT to indicate their collusion….” When contacted, Axis Bank issued a bald statement “that all credit decisions were taken after due appraisal keeping in mind all aspects, including that of security”. According to sources, the Rs 252-crore guarantee was backed up against the existing limit of another client with AAA ratings—that’s why the change of name was done manually.

It raised red flags as to how Infotel—a company with a net worth of Rs 2.4 crore—could get a bank guarantee of Rs 252 crore without giving a security deposit. What nobody has yet been able to explain is why and how the Rs 252-crore bank guarantee cheque issued by Axis Bank, Mumbai, was tampered with. And who deleted the computer-printed name on the cheque in favour of a handwritten one. Continue reading

iBankers put on notice for listing fake SME IPOs: Sebi: Many firms got listed for tax evasion, money laundering

http://www.mydigitalfc.com/news/ibankers-put-notice-listing-fake-sme-ipos-055

iBankers put on notice for listing fake SME IPOs

Sebi: Many firms got listed for tax evasion, money laundering

Ashwin J Punnen

2 July 2015

Financial Chronicle

As part of its crackdown on price manipulation on the SME trading platforms of the stock exchanges, market regulator Sebi has asked merchant bankers operating in this space to improve due diligence while bringing companies for listing. Sebi has found that many companies that exist only on paper just for the purpose of tax evasion and money laundering were brought to the market. The regulator now wants iBankers to ensure that the due diligence is done properly. Sources said Sebi was looking at the role of merchant bankers in the SME IPOs. The market regulator is also likely to review the regulation governing the SME segment, where companies can raise funds from HNIs and institutional investors with minimum disclosure requirements.

Earlier this week, Sebi had barred four companies — Eco Friendly Food Processing Park, Esteem Bio Organic Food Processing, Channel Nine Entertainment and HPC Biosciences — along with 235 other entities from the market for making Rs 614 crore illegal gains through suspected money laundering and tax evasion. Most of these companies have no real business, yet they managed to raise funds and got listed on the SME platform. Several companies with turnovers of less than Rs 5 crore and market capitalisations of over Rs 500 crore have seen sharp rise in stock prices without any change in fundamentals. Continue reading

Stock manipulation: Gajra Bevel Gears

Stock manipulation: Gajra Bevel Gears
8 July 2015

The stock price of GBG rallied 399% unhindered, in three months, despite no business activities Gajra Bevel Gears (GBG) is a dud company. Over the years, accumulated losses have eroded its entire net worth and made the company financially sick. The company stopped all manufacturing after 31 October 2006. In 2010, the Board for Industrial and Financial Reconstruction declared GBG a ‘sick industrial company.’ Over the past few years, GBG made a one-time settlement of the loan accounts of State Bank of India, IFCI, IDBI, etc. The premises of GBG are under the seizure of the provident fund authorities, for recovery of their dues. The PF authorities have now granted GBG an instalment facility for payment. Despite no business activity over the past nine years, suddenly, the price of GBG rallied unhindered from 2 March 2015 to 15 June 2015. In these three months, the stock rose 399% from Rs1.17 to Rs5.84, closing at the upper circuit on every single day.

However, this humongous rally was short-lived; the 15 days that followed, from 15 June 2015 to 30 June 2015, the stock price declined 19% to Rs4.72. This time, it closed at the lower circuit in each trading session. From a trading turnover averaging Rs10,000, for the year ended February 2015, the turnover shot up to average Rs1.11 lakh for the four-month period ended 30 June 2015. Who were the investors in GBG during this four-month period and why a sudden interest in a dud company? Seems like another pump & dump operation to launder money. Will the regulator investigate?

Stock manipulation: Birdhi Chand Pannalal Agencies

http://www.moneylife.in/article/stock-manipulation-birdhi-chand-pannalal-agencies/42410.html

Stock manipulation: Birdhi Chand Pannalal Agencies

24 June 2015

Moneylife

Despite terrible financials, the stock price of Birdhi Chand Pannalal Agencies appreciated by more than 3451%, or 36 times in 9 months

Birdhi Chand Pannalal Agencies Limited (BCPAL) was earlier in the textiles business. In May 2015, the management decided to change the name of the company to BPCL International Ltd. Earlier, BCPAL had also announced plans to diversify into financial services and take over control of a non-banking finance company. Further, it plans to apply for a dealership of Steel Authority of India’s products. All this is rubbish. Over the past four quarters, BCPAL reported total revenue of just Rs40 lakh and a loss of Rs11 lakh. Yet, over the past nine months, the stock price appreciated by more than 3451%, or 36 times, to Rs559.25 on 11 June 2015, from Rs15.75 on 8 September 2014. In other words, if you had invested Rs10,000, in just nine months, you would be richer by over Rs3.55 lakh. Just one to four stocks were traded in each trading session over the past year, except in a few bulk deals. Each time, the stock hit the upper circuit. However, from 3 June 2015, the trend reversed direction, hitting the lower circuit in each session. Another pump & dump operation? The regulator doesn’t seem to care. The company has some 1,200-odd shareholders. Who are they?

Fosun’s (656 HK) Folli Follie and the receivables question; receivables were worth 280 days worth of sales at the Hong Kong subsidiary. Add in “advances to suppliers” of $82m and “other receivables” of $39m and the total hit 400 days worth of sales

http://ftalphaville.ft.com/2015/07/09/2133993/folli-follie-and-the-receivables-question/

Folli Follie and the receivables question

Dan McCrum

| Jul 09 15:07 | 1 comment | Share

Back in April we jumped on the Folli Follie results conference call to ask the Greek listed jewellery retailer about the unusually large balance for trade receivables in a Hong Kong subsidiary.

Receivables are sales recorded, but where cash is still due from the customer. Wefocused on the total in the Hong Kong entity, audited by a small local firm, because it appears to have been persistently high, at times representing the best part of a year’s worth of revenues. A large and growing receivables balance can signal problems with the quality of sales shipped on a consignment basis. Continue reading