Enron-esque accounting practices in China?

[marmar]

from 24/7WallStreet:




Can any accounting out of China be trusted? This is what prudent investors have to start asking themselves. Since early this year a new report comes out nearly every week that reveals some alleged misbehavior on the part of yet another China-based firm. The first firm to earn the spotlight was a billboard company, but now some of China’s biggest state-owned firms are taking the stage. If the state-owned firms are fudging on the books or ‘overlooking’ key data, how on earth do investors trust any company’s reports in China?

Aluminum Corporation of China, or Chinalco, is a holding company and the controlling shareholder in Aluminum Corporation of China Ltd. (NYSE: ACH), or Chalco. Along with China National Offshore Oil Corp. and China Unicom, which respectively control Cnooc Ltd. (NYSE: CEO) and China Unicom (Hong Kong) Ltd. (NYSE: CHU), Chalco has been named as one of 17 state-owned enterprises to have irregularities and other violations in their financial statements to the Chinese government in fiscal year 2009. China’s Xinhua news agency reports that by March of this year 735 irregularities had been corrected and “65 people responsible for the irregularities or violations have been punished.”

The accounting irregularities for the 17 companies included overstatement of assets, profits, and liabilities by $292.4 million, $405 million, and $528 million, respectively. Undercounted assets totaled $446 million, while undercounted profits totaled $185 million, and undercounted liabilities totaled $385 million.

In the case of Chinalco, the problems appear to be violations of Chinese rules more than accounting irregularities. Chinalco included 11 companies in its 2008 financial report that failed to meet profit targets by the end of 2009 and launched or acquired 10 projects for which Chinalco did not have permission from the state. The total investment in the 10 projects topped $1.4 billion in 2008. Chinalco also got slapped for some irregularities in its senior managers’ shareholdings. ...........(more)

The complete piece is at: http://247wallst.com/2011/05/25/chinese-accounting-woes-move-up-to-large-caps-ach-aa-ceo-chu-renn-lft-abat-ccme-shz/

[DCBob]

1. Many have been speculating stuff like this.. including government ecnonomic statistics.

investors beware.

[madrchsod]

2. china is going to crash and burn ..

low on water and electricity. no accountability when it comes to there true nature of the economy. a glut of over priced homes and apartments that would make our problems seem small. best not mention the social unrest that is just beneath the surface.