Discrepancies in Chinese Company’s Financial Statements Under Fire

Michelle Remo, “Big 4″ observer
July 03, 2011 /

From about 714 million yuan of cash and bank balances as stated in its previous report, the financial statement of a Chinese company has fallen short of 15 million yuan in an update.

S-chip China Gaoxian Fibre Fabric Holdings issued an update of its questionable financial statements to the the Singapore Exchange (SGX).

The report came after PricewaterhouseCoopers auditors confirmed that the Chinese company had an aggregate cash and bank balance of about 699 million yuan (S$133 million) for the financial year ended March 31.

Previously, China Gaoxian reported in a related statement about 714 million yuan of aggregate cash and bank balances.

According to the auditors of the Chinese company, around 1 billion yuan went missing from its accounts as of December 31 last year.

During this time also, the aggregate cash and bank balance of the Chinese company was approximately S$17.69 million compared to S$209.21 million based on its unaudited financial statements announced on February 27, 2011.

A portion of the 1.1-billion-yuan proceeds raised during the Korean dual listing had been used, the Chinese company claimed.

In addition, China Gaoxian’s outstanding bank liabilities were about S$54.2 million during this time, compared to the previously disclosed S$29.86 million.

Under the command of special auditors, PricewaterhouseCoopers was instructed to look into the accounts and review how the funds were used.

Tradings of shares of the Chinese company on the SGX and its Korean Depository Receipts on the Korea Exchange were suspended on March this year after Ernst & Young auditors failed to verify the bank balances of Zhejiang Huagang Polyester Industrial and Fujian New Huawei Fibre Dyeing, subsidiaries of the Chinese company.

Successive resignations were recorded at the company during the height of the controversy.

Chief executive and chairman of the Chinese company, Cao Xiangbin has stepped down and will be replaced by non-executive director Jerome Tham.

Meanwhile, chief financial officer Raymond Wong will be replaced by Chen Guo Dong, who had been Wong’s assistant since January 2010.

Two other executive directors Lau Chung Kong and Liu Yijie have resigned from the board.

 

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