Thursday 26 March 2009

Another S-chip company’s books queried

Yet another China-based company listed on the local bourse has fallen short in its corporate governance.

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Guanyu said...

Another S-chip company’s books queried

By Francis Chan
26 March 2009

Yet another China-based company listed on the local bourse has fallen short in its corporate governance.

The audit committee and independent auditors of China Sun Bio-Chem Technology Group Company have been unable to verify certain key balances and transactions. Yesterday, the company was suspended from trading.

Directors of the firm said in a filing on the Singapore Exchange (SGX) that independent auditor PricewaterhouseCoopers (PwC) required ‘more time to obtain relevant information in relation to certain transactions and assets of the Group’.

These include China Sun Bio-chem Technology’s bank and cash balances, as well as trade receivable balances, which will be needed before PwC can finalise the firm’s financial statement for the year ended Dec 31, 2008.

The audit committee and PwC claimed that they had received little cooperation from the company’s chief executive (CEO), Mr. Sun Guiji.

According to its statement to SGX, China Sun Bio-chem Technology said PwC was unable to establish the ‘authenticity of bank confirmations’ received in relation to the existence of bank balances amounting to 592 million yuan (S$131 million).

Mr. Sun, however, explained that funds were remitted out of the firm’s bank accounts on Dec 31 last year to purchase ‘corn raw materials’.

In response, PwC said it has not been provided with sufficient audit evidence to validate Mr. Sun’s claim and that there was a string of outstanding queries left unanswered by the CEO.

This included trade receivable balances and debt information, which PwC said it had difficulty establishing. The firm questioned the existence of certain debtors among the accounts receivable balances recorded in the company’s books.

Listed firms such as China Sun Bio-Chem Technology have been under the spotlight for their lack of effective corporate governance of late.

Since October, when problems with paying off loans first surfaced at FerroChina, most such scandals have involved the so-called S-chip companies listed on the local bourse.

Catalist-listed Oriental Century’s chairman and CEO Wang Yuean had recently admitted to inflating sales and cash balances. Its problems came to light after auditor KPMG had difficulties verifying the company’s cash balances.

China Printing & Dyeing saw its husband-and-wife team run off after the China parent company defaulted on debts.

FibreChem Technologies could not finalise its books, while the chief executive of Sino-Environment and founder of Beauty China pledged stakes in their companies to obtain personal loans.