Boshiwa (1698 HK)

Listed in September 2010, Boshiwa operated a chain of retail stores in China. It designed, manufactured and retailed clothing for children. On the 15th of March 2012, Boshiwa announced[1] that its auditors, Deloitte Touche Tohmatsu, had resigned and that there would be a delay in releasing its 2011 annual report. Deloitte cited[2] the “existence and commercial substance of recorded prepayments amounting to RMB392m with a supplier of the Group; and the existence of specified OK card distributors, merchandise distributors and trade suppliers of the Group and the commercial substance of recorded transactions with these entities.”

On 5th April 2012, the company announced[3] the establishment of a Special Investigation Committee which appointed PwC to conduct a Forensic Investigation Exercise. Findings were made public[4] on 26th April 2013 which highlighted huge unreconciled differences with supplier prepayments and fictitious sales transactions with undisclosed related party distributors. The Special Investigation Committee rejected many of the report’s findings.

In May 2012, Zenith was appointed auditor but then resigned in May 2013. Subsequently, Crowe Horwath was appointed auditor but was unable to audit the company. Unaudited results released[5] in October 2014 show significant losses in 2011-13. Provisional liquidators were appointed in February 2015.

Boshiwa clearly had an underlying business but was aggressively trying to inflate revenues and profits by round-tripping through suppliers and off balance sheet subsidiaries and/or distributors.


[1] Hong Kong Stock Exchange: Announcement, 15 Mar 2012

[2] Hong Kong Stock Exchange: Boshiwa Clarification Announcement, 15 Mar 2012

[3] Hong Kong Stock Exchange: Special Investigation Committee, 5 Apr 2012

[4] Hong Kong Stock Exchange: Update on Recent Development of Suspension of Trading, 26 Apr 2013

[5] Hong Kong Stock Exchange: Announcement, 17 Oct 2014

Boshiwa: Annual Report 2010

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