Cash is considered among the hardest assets for a company to fake, which is why ...
SHANGHAI/SINGAPORE - Cash is considered among the hardest assets for a company to fake, which is why the disappearance of a combined $6.1 billion from two Chinese companies has dumbfounded investors and forced regulators to take action.
Weak governance has long been a black mark against mainland Chinese companies. Yet these cases have still stunned many investors as they involve straightforward cash, and because the sheer size of the disappearances is equivalent to more than half the two groups’ combined market capitalization before they disclosed the issues, triggering calls for tougher punishment for any corporate wrongdoing.
Officials appear to be listening. China’s top securities regulator, Yi Huiman, told a conference on May 11 that “those who did bad things must pay the price”. The chairman of the China Securities Regulatory Commission also vowed to tighten scrutiny of corporate governance and push for tougher punishment.
Kangmei disclosed its issue on April 30 and has said almost nothing beyond its initial diagnosis of “accounting error”. It said China’s securities watchdog was investigating the matter. Kangmei’s auditor GP Certified Public Accountants was also put under investigation, according to local media reports and the auditor.
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