Chinese RTOs: What Can Investors Buy When Even 'Big Four' Auditors Fail?

Alfred Little submits:

On March 29th China MediaExpress Holdings (NASDAQ: CCME) filed an 8-K (here) that included a detailed list of reasons why its auditor, Deloitte, resigned.

Deloittes concerns included:

  • Authenticity of bank statements
  • Suspicious circumstances surrounding bank balance confirmation procedures
  • Validity of certain advertising agents/customers and bus operators
  • Possible undisclosed bank accounts and bank loans
  • Subsidiaries shown in SAIC filings are inconsistent with managements representations
  • Validity of a sampling of tax invoices from certain large transactions
  • Subsidiary tax payments to the SAT could not be verified
  • Cash salaries to certain employee bank accounts could not be verified
  • Production process of advertising programs could not be verified
  • Potential double counting of a certain number of buses

Most of Deloittes Concerns Share a Common Thread: Paper

Bank statements, confirmation letters and contracts of all types, government filings, ownership certificates and tax invoices are all paper documents easily forged by dishonest management with the help


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