China Environment auditors uncover phantom gross receivables
China Environment, which treats industrial waste gas, on
Friday said two surprise site visits by its auditors have uncovered gross
receivables for fiscal 2015 that are either "non-existent", or
overstated.
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Jamie Lee, Business Times
14 January 2017
China Environment, which treats industrial waste gas, on Friday said two surprise site visits by its auditors have uncovered gross receivables for fiscal 2015 that are either "non-existent", or overstated.
Of the total gross receivables of 786 million yuan (S$163 million) before impairment, about 43.5 per cent is concluded to be non-existent, and 30.8 per cent is concluded to be overstated, the company said in a regulatory statement. The rest are still under investigations.
Based on findings from its auditors' second site visit alone, the board noted trade receivables due from Shanxi Electric amounting to 70 million yuan in its unit, Fujian Dongyuan Environmental Protection Co Ltd, is likely to be grossly overstated by 48 million in the unaudited group financials for fiscal 2015.
These trade receivables make up about 8.9 per cent of the total gross receivables of 786 million yuan before impairment.
"When auditors RT reached Shanxi, the Shanxi finance manager when asked about the confirmation, replied that the figure confirmed was not correct," said China Environment.
"The Shanxi finance manager also informed that the correct amount should be approximately 22 million yuan instead of 70 million yuan."
China Environment has also been unable to confirm the amount of trade receivables due by the other two customers amounting to 44 million yuan and 14 million yuan respectively. "Further investigations for these two customers are still in progress."
The company will write to the former executive chairman Huang Min and the ex-CFO to query on these non-existent and overstated trade receivables identified during the two surprise site visits. The group will assess and make adjustments to its fiscal 2015 accounts.
The company separately said it has received a letter of demand from law firm Shook Lin & Bok over payments of about S$19,676. The company said the existing board is not involved in engaging the legal services, and is seeking clarification on the claims. Shares of China Environment remain suspended.