Confirmation.com Comments on SEC Action Against Longtop Securities That Highlights Growing Investor Risk of Management-Bank Collusion in U.S. Listed Chinese Securities

BRENTWOOD, Tenn., March 15, 2012 /PRNewswire/ -- The SEC's revocation of Longtop Financial Technologies Limited's registration highlights the large risk that confirmation fraud poses to investors and corporate finance officers doing business with Chinese companies, says Chris Schellhorn, CEO of Confirmation.com, the creator and world's leading provider of secure audit confirmation services.

The SEC acted against Longtop Financial Technologies Limited because among other things, the company failed to file its annual report for fiscal year that ended on March 31, 2011. Longtop was unable to file its annual report because their former independent auditor resigned in May 2011 citing serious discrepancies with bank confirmations and that Longtop officials including the chief operating officer deliberately interfered with the audit confirmation process.

Bank confirmation discrepancies are also purported to have led NASDAQ to recently delist several Chinese-based companies including Advanced Battery Technologies, Inc., China MediaExpress Holdings, Inc., and ShengdaTech, Inc.  Advanced Battery was delisted because the company failed to provide NASDAQ with audit confirmations of its cash accounts that were to be prepared by bank personnel in the presence of the company's independent auditor. In his letter to shareholders, Zhiguo Fu, Chairman of Advanced Battery Technologies, Inc. acknowledged that suspected collusion was the reason for NASDAQ's special request, but failed to comply because he considers bank confirmations a "degrading procedure" and was successful in getting the highest level at each of their banks to refuse a special audit of their cash accounts.   

"Investors aren't typically harmed as much by fraud committed against a company's management," noted Schellhorn.  "What costs investors billions are frauds committed by management."

"With frauds on the rise among U.S.-traded Chinese companies, there is growing speculation that collusion is taking place between some Chinese companies and their bankers," said Schellhorn.  "Collusion happens when the company being audited will ask their relationship manager at the bank to provide false information on the confirmation response." 

In March 2011, the independent auditors for China MediaExpress Holdings, Inc. resigned because they suspected the company's bank statements were not authentic and believed that the bank confirmation procedures were carried out under suspicious circumstances.  Discrepancies with ShengdaTech's bank balances and confirmation responses are some of the issues that led their independent auditor to resign in April 2011. According to Bloomberg, investors in Chinese public companies lost more than $10 billion in market value in 2011 after companies like China MediaExpress Holdings, Inc. and Longtop Financial Technologies Limited disclosed auditor resignations or financial statement irregularities. 

"Typically if a company interferes with audit confirmation procedures like the executives did at Longtop and Advanced Battery Technologies, it's often an indicator of greater fraud taking place. Our service Confirmation.com prevents upper-level management from interfering with the confirmation process because we identify the validity of every participant in the confirmation process."

Today, auditors and financial institutions in over 100 countries use Confirmation.com because the propensity for fraud and the magnitude of those frauds on a global scale are both increasing.  By verifying the authenticity of each user, this cloud-based solution not only improves the quality of audits, it brings greater investor confidence into the financial statements.

About Confirmation.com
Confirmation.com is the creator and world's leading provider of secure electronic audit confirmation services. It processes over $1 trillion in confirmation information annually for a majority of public companies, as well as private companies, non-profits and government agencies.  In addition to its bank confirmation solution, the company provides solutions for more than 30 different types of audit confirmations including accounts receivable confirmations.  Confirmation.com is the Preferred Provider of Electronic Confirmations for the AICPA Trusted Business Advisor™ Solutions Program and is endorsed by the American Bankers Association. Confirmation.com has also received numerous awards including being a multi-year alumnus on the Inc. 500 list for 2010 and 2011.  Several hundred In-Network responding companies including all of the Top 10 banks in the U.S. and over 8,000 accounting firms in more than 100 countries trust Confirmation.com for their audit confirmation needs. For more information, visit Confirmation.com.

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Brian Fox
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SOURCE Confirmation.com