Chinese A-share listed Dalian Zhangzidao Fishery Group reported four huge scallop losses in six years time, leading to China Securities Regulatory Commission (CSRC) investigation.
Today, the CSRC said it fined Zhangzidao 600,000 yuan and banned four people from entering the market for varied periods of time.
How did CSRC determine that Zhangzidao manipulated the financial statements? China BeiDou navigation system plays a key role.
In 2016, Zhangzidao has been losing money for two years in a row, and whether it will be profitable that year is directly related to whether the company will suspend listing.
In order to achieve profitability, Zhangzidao inflated its 2016 profits by inflating its costs.
The investigation found that the amount of area that Zhangzidao fished was provided to the financials on a monthly basis by the company's personnel responsible for fishing There is no day-to-day objective record of the entire process.
But in fact, the company's fishing vessels have been recorded by dozens of BeiDou satellites in terms of what waters they visited and how long they stayed.
The BeiDou satellite navigation system is an independently built satellite navigation system in China, with civilian positioning data accurate to within 10 meters. It is capable of recording the position, speed and heading of fishing vessels.
The innovative use of this system in the investigation has exposed Zhangzidao's self-secret counterfeiting tactics.
The investigators hired two professional third-party organizations to analyze the satellite positioning data for operational status and fishing trajectory respectively. Restoring and calculating the area, the three parties separately restored the highly consistent trajectory of the fishing voyage.
The comparison reveals that in 2016, the company actually harvested nearly 140,000 mu more area than recorded in its books.
This means that the actual cost was RMB 60 million more than the books, and all of these RMB 60 million costs were Zhangzidao was hidden.
According to the Zhangzidao cost accounting method, inventory assets in areas that were re-seeded should be treated as write-offs, which in turn relate to inventory assets of 71.11 million yuan need to be included in non-operating expenses as a loss.
In these two ways, Zhangzidao succeeded in achieving a so-called "book profit" in 2016, preserving the Public company status.
By 2017, Zhangzidao was up to his old tricks, again claiming scallop runs and deaths, thereby digesting the previous year's The hidden costs and losses totaled about 130 million yuan.
Zhangzidao's 2017 disclosure stated that the company conducted spot checks at 120 different points.
However, satellite positioning system data showed that the sampling vessel did not pass through 60 of these points during the execution of the autumn survey, suggesting that the sampling vessel No sampling was performed at these points at all.
In early January 2018, Zhangzidao CFO Gou Rong became aware of the company's 2017 Net profit is no more than $30 million.
Previously Zhangzidao had been claiming that its 2017 profit estimates were between 90 million and 110 million yuan .
Gou Rong also reported the matter to Zhangzidao's chairman Wu Hougang.
This was a material matter that should have been disclosed within 2 working days, but Zhangzidao did not disclose it in the required time. Until the public disclosure on January 30, investors were seriously misled.
