China Milk Products Group was asked on Monday by the Singapore Exchange to disclose why documents needed for a cash audit had not been given to the company's auditors.
SGX said it had directed the company to perform an urgent audit of its cash holdings and to announce the results by Mar 15, but were told on Mar 19 that auditors Grant Thornton had yet 'to finalise their reportprimarily due to the fact that certain executed documentation which they require for the cash audit has not been furnished in full to them'.
SGX also wants the company to provide an update on whether its auditors have been able to review China Milk's Q3 2010 financial statements and to confirm that the results will be released by the April 5 deadline. It also wants an update on the progress of the company's search for a new chief financial officer.
China Milk is in technical default of some US$170 million of debt after bondholders exercised put options. The company claims it has enough cash to pay its obligations and is only awaiting regulatory approval for the money to be transferred out of China.
'The Exchange takes a serious view of the developments in the Company and requires the Board to address the following issues immediately via a public announcement on SGXNet,' the SGX said
Very true. Investors should read the alleged Confession of a S Chip CEO. It details how a company from China ends up being listed in SGX or HKSE. An eye-opener.
WeiQiQi ( Date: 21-Mar-2010 17:52) Posted:
This is exactly the case in Fibrechem cos external auditor could not get bank confirmation of the cash balance and issued a qualified audit statement. Thereafter, things just spiralled downhill.
From listing perspective, all vested parties get huge fees in returns, namely SGX gets listing fees, Investment Bankers, auditors for doing due deligence and get the account of a public listed company with audit fees in hundred of thousands annually. Everyone wants to get a company listed...
beruangface ( Date: 21-Mar-2010 00:54) Posted:
Obviously you're not an accounting trained person, I was talking about external bank confirmation, not the bank statement you receive every month. Bank confirmation is sent from the bank directly to the external auditors. Secondly, if the company can 'simply borrow money', they can easily pay off the bondholders, they dont have to end up like this.."suspended"
Do you think ChinaMilk is as smart as Enron and Madoff? Madoff did not overstate the cash, he is much smarter than what you can think of (please watch CNBC 'House of Cards') this person manipulated the whole housing and money market.. looking at CM directors profile, i doubt they have any nvestmet genius like Madoff, if they have, they wont even need to default on this small loan, right?
It's SGX responsibility to vet through the financial statements of 700 companies before and after listing, they are paid for this, don't you know that?
External auditors are paid for giving reasonable assurance on the financial statements but not detecting fraud, but if they are negilgence or do not perform their duty according to professional standards, they are liable as well..that's the reason why auditors indemnity insurance is very high and the audit fee they charge is never cheap, and guess what? It's from your pocket, Grandmaster, a naive shareholder..
This is exactly the case in Fibrechem cos external auditor could not get bank confirmation of the cash balance and issued a qualified audit statement. Thereafter, things just spiralled downhill.
From listing perspective, all vested parties get huge fees in returns, namely SGX gets listing fees, Investment Bankers, auditors for doing due deligence and get the account of a public listed company with audit fees in hundred of thousands annually. Everyone wants to get a company listed...
beruangface ( Date: 21-Mar-2010 00:54) Posted:
Obviously you're not an accounting trained person, I was talking about external bank confirmation, not the bank statement you receive every month. Bank confirmation is sent from the bank directly to the external auditors. Secondly, if the company can 'simply borrow money', they can easily pay off the bondholders, they dont have to end up like this.."suspended"
Do you think ChinaMilk is as smart as Enron and Madoff? Madoff did not overstate the cash, he is much smarter than what you can think of (please watch CNBC 'House of Cards') this person manipulated the whole housing and money market.. looking at CM directors profile, i doubt they have any nvestmet genius like Madoff, if they have, they wont even need to default on this small loan, right?
It's SGX responsibility to vet through the financial statements of 700 companies before and after listing, they are paid for this, don't you know that?
External auditors are paid for giving reasonable assurance on the financial statements but not detecting fraud, but if they are negilgence or do not perform their duty according to professional standards, they are liable as well..that's the reason why auditors indemnity insurance is very high and the audit fee they charge is never cheap, and guess what? It's from your pocket, Grandmaster, a naive shareholder..
grandmaster89 ( Date: 17-Mar-2010 14:33) Posted:
Bank statements means nothing. The Management can easily borrow cash and place it in the bank to make it seem that the cash exist. Any company can fall into fraud even blue chips like Enron and the Madoff Fund. Whenever you invest in a company which you have no control or say in, you are already taking a massive leap of faith. What do you expect SGX to do ? Do you want her to vet through each of the 700 listed firms financials ? Do you have any idea how long that will take ? And the cost ?
Even auditors are not paid to certify accounts and now you expect SGX to do it LOL ...
In capital market, definitely I do not invest alone! I should consider others' think/opinions about it>
wishbone ( Date: 20-Mar-2010 20:36) Posted:
I wonder why you ask this question here : “What shall we do about it?”
I thought u already have the answer and you were so boastful saying this in the "S chip is still in the shit" thread.
Hulumas
( Date: 19-Mar-201016:17) Posted:
Yes, I do not touch but I buy heavily because I get
very special price level advantages as a few only dare to buy S-chips
as described today in the Strait Times article "MOST S-CHIPS BEING
FROZEN OUT BY ANALYSTS".
SGX is doing "SHOW ACTION BUSINESS"........ Is that what you mean?
wishbone ( Date: 18-Mar-2010 10:03) Posted:
Most of the time I can only see SGX questioning the company when the share price of any counter went up unexpectedly. The best part of it, the STANDARD QUESTIONS are asked every time without fail and most of the company replied with also the STANDARD ANSWERS (Most probably they already prepared this well before hand anticipating the questions which are SO SO SO STANDARD).
Besides this, I hardly see SGX doing more than this.
iwonder ( Date: 18-Mar-2010 00:10) Posted:
I agree with wishbone and beruangface. By right SGX has a responsibility to fulfill.
But then things always go left.....SGX is only good at imposing hefty fines to law abiding ppl like us who sometimes forget and over sell.
Even the Singapore law cannot bring a Romanian criminal to justice what more can SGX do to China companies who flaunt the listing rules.....haha
What is the fiduciary duties of directors in a company registered in Singapore?
I believe, most important of all, is to act at all times in good faith in the interests of the company and its stakeholders. I suppose this is under the Company Acts. Below is the link to the ACRA's website highlighting the statutory duties, roles and responsibilities of a company directors.
Personally, I steer clear of S Chips unless they pass a very strict set of rules. Even then, I do not use substantial cash from my portfolio. As I have earlier mentioned, the systems in place are not meant to weed out frauds. SGX and MAS will have to either create a whole new system or raise the entry bar higher. I believe the growing numbers of S Chips seeking to be privatized or dual listed will be the catalyst of such actions.
Ultimately, it is the individual investor who chooses to buy into the Company. There is always an element of risk investing in a Company whose operations and Management are in foreign countries. If you are unsure, just steer clear. You can never make loss unless you had invested into something.
Personally, I steer clear of S Chips unless they pass a very strict set of rules. Even then, I do not use substantial cash from my portfolio. As I have earlier mentioned, the systems in place are not meant to weed out frauds. SGX and MAS will have to either create a whole new system or raise the entry bar higher. I believe the growing numbers of S Chips seeking to be privatized or dual listed will be the catalyst of such actions.
Ultimately, it is the individual investor who chooses to buy into the Company. There is always an element of risk investing in a Company whose operations and Management are in foreign countries. If you are unsure, just steer clear. You can never make loss unless you had invested into something.
1) Please point to me where in the listing manual/rule book does it state that it is SGX job to audit the Financial Statements of each of the 700 listed companies. They only query for an explanation for any unusual figures. They don't send a team in to verify whether the financial statements are true.
2) Please point to me the law that states that auditors are personally liable if the company financial statements were fraudulent. Auditors are only liable if they fail to report fraud if they spotted any. A key example would be Arthur Andersen in the Enron scandal who were held liable because they destroyed evidences of fraud.
You have to understand that there is a difference between absolute assurance and reasonable assurance. The bulk of the auditing and preparation of the financial statements are done in-house by the company's internal audit department. The EA (external auditors) will do a sampling of the data to gather sufficient audit evidence that the financial statements are in order. This allows them to provide the necessary opinion that everything is in order. The EA do not go through every single transaction in the year for that will take too much time. This is why they never provide absolute assurance since it wasn't them who prepared the Financial Statements hence they cannot be liable for any legal action.
This brings back my point - There is no mechanism which guarantees that any company is fraud-free. Any investor will have to trust that the Management will work to enhance and not destroy shareholder's value. Systems like 'external auditors', 'Audit Committee', 'SGX Queries' or the press are not infallible and there will always be those who will slip through the cracks. I don't blame the system since it wasn't designed to hunt for fraud. Naturally, an intelligent investor will have a greater chance of avoiding potential fraud companies by studying its actions and finances. In CM's case, an intelligent investor will be asking why did the Management raise US$150 million debt and not spend a dime all these years or how its poor sales in 2009 will affect it.
As to your bank confirmation point, I misunderstood your post. I have no idea how CM or Oriental Century managed to hide/inflate their cash. Personally, if my cash was real, I would have used my offshore holding company to borrow US$170 million from an overseas bank to repay the bond-holders. Meanwhile, I would pledge my bank deposit in PRC as collateral while presenting the SAFE application. Naturally, I should have started applying to transfer cash out of the PRC months prior the early redemption.
Obviously you're not an accounting trained person, I was talking about external bank confirmation, not the bank statement you receive every month. Bank confirmation is sent from the bank directly to the external auditors. Secondly, if the company can 'simply borrow money', they can easily pay off the bondholders, they dont have to end up like this.."suspended"
Do you think ChinaMilk is as smart as Enron and Madoff? Madoff did not overstate the cash, he is much smarter than what you can think of (please watch CNBC 'House of Cards') this person manipulated the whole housing and money market.. looking at CM directors profile, i doubt they have any nvestmet genius like Madoff, if they have, they wont even need to default on this small loan, right?
It's SGX responsibility to vet through the financial statements of 700 companies before and after listing, they are paid for this, don't you know that?
External auditors are paid for giving reasonable assurance on the financial statements but not detecting fraud, but if they are negilgence or do not perform their duty according to professional standards, they are liable as well..that's the reason why auditors indemnity insurance is very high and the audit fee they charge is never cheap, and guess what? It's from your pocket, Grandmaster, a naive shareholder..
grandmaster89 ( Date: 17-Mar-2010 14:33) Posted:
Bank statements means nothing. The Management can easily borrow cash and place it in the bank to make it seem that the cash exist. Any company can fall into fraud even blue chips like Enron and the Madoff Fund. Whenever you invest in a company which you have no control or say in, you are already taking a massive leap of faith. What do you expect SGX to do ? Do you want her to vet through each of the 700 listed firms financials ? Do you have any idea how long that will take ? And the cost ?
Even auditors are not paid to certify accounts and now you expect SGX to do it LOL ...
beruangface ( Date: 17-Mar-2010 14:04) Posted:
As shareholders, we are relying on the company BODs and management to manage the company with integrity, we choose to buy after relying on the financial statements and the auditors report, if the figures are accurately presented, we have no one to blame but ourselves if the company falls into financial difficulty. However in this case, it's clearly the cash is overstated, that's the reason why CM can't pay its bondholders. If the external auditors signed off the financial statements for the past few years without getting any external bank confirmation, isn't they are not performing their duty according to the professional standards? As I said, SGX can pretend nothing has happened, as their main objective is to get as many companies to list on SGX and earn the best listing fees in the region, they are just another private company, maybe it's time for the government to relook into this issue seriously and question whether a private company can be a watchdog and protect the innocent shareholders like us..
I wonder why you ask this question here : “What shall we do about it?”
I thought u already have the answer and you were so boastful saying this in the "S chip is still in the shit" thread.
Hulumas
( Date: 19-Mar-201016:17) Posted:
Yes, I do not touch but I buy heavily because I get
very special price level advantages as a few only dare to buy S-chips
as described today in the Strait Times article "MOST S-CHIPS BEING
FROZEN OUT BY ANALYSTS".
Hulumas ( Date: 19-Mar-2010 13:46) Posted:
What shall we do about it?
iwonder ( Date: 18-Mar-2010 22:19) Posted:
Most likely they are pretending to be rich.
If they have the contacts, it will be easy. Just like the case of Sapphire Corporation, the Sichuan Shantung Mining just transfer $35 mil without a hitch... for converting the bonds into shares.
If they have the contacts, it will be easy. Just like the case of Sapphire Corporation, the Sichuan Shantung Mining just transfer $35 mil without a hitch... for converting the bonds into shares.
If they have the contacts, it will be easy. Just like the case of Sapphire Corporation, the Sichuan Shantung Mining just transfer $35 mil without a hitch... for converting the bonds into shares.
yummygd ( Date: 18-Mar-2010 10:11) Posted:
just a thought now they are pretending they are very cash rich just cant transfer out of china den does it mean that if someone go china and collect they can get their money??
If they have the contacts, it will be easy. Just like the case of Sapphire Corporation, the Sichuan Shantung Mining just transfer $35 mil without a hitch... for converting the bonds into shares.
yummygd ( Date: 18-Mar-2010 10:11) Posted:
just a thought now they are pretending they are very cash rich just cant transfer out of china den does it mean that if someone go china and collect they can get their money??
Be fair: it is true that it is rather difficult to transfer money out of China. In my previous job, I came to understand this. Although it is difficult but still possible.
The point here is not b'cos of this, it is whether the company REALLY has the Money in the bank in China. Many a time, this is not true and it ended this way.
yummygd ( Date: 18-Mar-2010 10:11) Posted:
just a thought now they are pretending they are very cash rich just cant transfer out of china den does it mean that if someone go china and collect they can get their money??
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