Lantian Stock was China's first state-owned agricultural business to have gone through the corporatization reform in mid 90's. However, in October 2001, its resplendent image was smashed by an academic researcher, Liu Shuwei with her strong 600-word article that pointed out the liquidity crisis of Lantian Stock. Hence, all banks in China refused to offer loans to the business. Liu confronted defamation prosecution brought up by the company who denied the allegation. The defamation charge was dropped finally as the Chinese regulators began to unveil the hidden truth that Lantian Stock had really involved in perpetrating and misreporting bookkeeping fraud.
Chinese media also dug up the contentious background, fabulous narratives and the previous fraud record of Lantian Stock. She remained skeptical about why associated parties earlier had not found such wrongdoings since Liu could uncover the misstatement based on some basic financial ratio analysis. Alternately, the CPA or auditing firm of Lantian Stock commented the fraud was undetectable as it had gone far beyond what CPAs could detect from its required process, and blamed it on the Chinese environment that was conducive to accounting fraud.
PUBLICATION DATE: March 18, 2009 PRODUCT #: HKU827-PDF-ENG
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