The Securities and Exchange Commission has filed complaints against two Chinese companies, China Intelligent Lighting & Electronics Inc. and China Century Dragon Media Inc., and is recommended sales of the companies’ shares be stopped (via WSJ.com). You can read the complaints here and here.Basically, the SEC is accusing the companies of lying about their balance sheets. According to the Wall Street Journal, both were clients of accounting firm MaloneBailey LLP and were dropped by the firm this March.
This is what the SEC (and MaloneBailey) had to say about each company specifically.
On China Century Dragon Media:
- The auditor noted “discrepancies in customer confirmations” and was unable to verify China Century’s bank records.
- Company management was unable to explain said discrepancies and unwilling to provide them with bank authorization to access official records.
- MaloneBailey also said that discrepencies are included in financial statements dating back to December 2008, making their opinion on the company unreliable.
On China Intelligent Lighting & Electronics Inc.:
- “…accounting fraud involving forging of the Company’s accounting records and forging bank statements.”
- MaloneBailey also found “discrepencies in the company’s accounts receivable.”
- Fraud could indicate an error in previously issued financial statements dating back to December 2009.
Neither company has traded shares since March, when New York Stock Exchange suspended them for failing to meet listing requirements. Add these two to the growing list of Chinese companies coming under fire from regulators for suspicious accounting practices.
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