http://english.caixin.com/2014-12-15/100763376.html

12.15.2014 18:51

Former SOE Head Handed Death Sentence for Fraud Scheme

Court finds former general manager of Guangzhou-based company guilty of scam involving loss of state assets worth 284 million yuan

By staff reporter Wang Jing (Beijing) –

A former executive of a state-owned enterprise in southeastern Guangzhou has been sentenced to death recently for bribery and draining hundreds of millions of yuan from state assets.

Zhang Xinhua, former general manager of Guangzhou-based Baiyun Nonggongshang United Co. Ltd, was found guilty by the city’s intermediate People’s Court of embezzling 72 million yuan worth of state-owned assets and taking another 100 million yuan in bribes. The court also convicted him of causing a loss of 284 million yuan in state-owned assets. Continue reading →

Discussion Questions:

(1) Chinese ecommerce giant Alibaba uses the VIE structure. Given the “success” of Alibaba’s IPO, are VIEs necessarily bad i.e. are companies with VIE structure more prone to accounting fraud? What kind of companies tend to use the VIE structure? Generate a list of companies with VIE structure in different exchanges in US and Asia and do some analysis…

(2) How can the management abuse their application of “shared power” in consolidating VIE? What is the accounting policy take on discretionary changes in the exercise of this power?

http://www.complianceweek.com/blogs/accounting-auditing-update/sec-cautions-companies-on-consolidation-analyses#.VJQKQ0ABA

SEC Cautions Companies on Consolidation Analyses

Tammy Whitehouse | December 17, 2014

The Securities and Exchange Commission is taking a closer look at who consolidates a variable interest entity, noticing some differences in how companies apply existing guidance and offering views to help make reporting more consistent. Continue reading →

Discussion Questions:

(1) Are companies audited by Baker Tilly HK more prone to accounting fraud? What are the firm characteristics e.g. state-owned companies vs privately-owned enterprises? Are they from certain industries? Are they structured as offshore holding companies? Generate the list of Baker Tilly audit clients and do some analysis..

(2) Do different audit firms have different policy in their audit of related-party transactions of Asian/ Chinese companies?

(3) Why has US SEC struggled for years to obtain information for dozens of accounting fraud investigations at China-based companies?

http://www.bloomberg.com/news/print/2014-12-17/sec-fines-baker-tilly-hong-kong-for-missing-red-flags-in-china.html

SEC Fines Baker Tilly Hong Kong for Missing Red Flags in China

By Alan Katz – Dec 17, 2014

The U.S. Securities and Exchange Commission sanctioned audit firm Baker Tilly Hong Kong and suspended two of its employees for signing off on the financial statements of a China-based company accused of fraud. Continue reading →