AN ARTICLE in the current edition of The Edge Singapore, quoting several sources, suggests that the widely-held worry over possible serious accounting issues or missing cash at China Hongxing is not quite justified.
“China Hongxing has cash. The boss is very rich,” says a source, referring to the Wu family which owns 33% of the company whose trading on the Singapore Exchange has been suspended since Feb 25.
“It’s probably a serious corporate governance issue linked to the behavior of its majority shareholders,” added the same source.
Another source told The Edge Singapore: “Given their character, they are not the type to misappropriate funds.” The company represents the primary business interest of its controlling shareholders.
“They have a small personal business, a wine bar in
Wu Rongguang, chairman of China Hongxing. Photo: annual reportKelvin Yeung, CFO of China Hongxing, hints that the problem might lie in the amount of information requested by the newly-appointed auditors, Ernst & Young, versus what the company was willing to disclose.
“This is their first year, so they asked for more information than normal,” he told The Edge Singapore.
“We provided whatever information they needed that is relevant. We haven’t withheld relevant information. We tried our best to give them information they requested.”
A CFO of another company, who has worked for the Big Four auditing firms before, says the auditing process and methodology is the same for big and small accounting firms.
“But there is more red tape in a Big Four firm. For example, if there is an audit issue, it is subject to review by more partners. Some of these issues may be technical issues that are not serious, such as the accounting treatment of certain items.”
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