Chinese sportswear company, China Hongxing Sports, listed in Singapore in 2005. In October 2010, joint auditors Grant Thornton and RSM Nelson Wheeler suddenly resigned. Ernst & Young was appointed to take over. Just four months later, in February 2011, the company announced that Ernst & Young had encountered irregularities in the bank balances, accounts receivables, accounts payables and other expenses - the hallmarks of a fraud - relating to its FY10 financials. The company triggered our Fake Cash Flow Fraud model between FY05 and FY08, meaning that it had traits similar to past frauds. We suspect that management inflated profits in order to aggressively sell down its stake at inflated prices. China Hongxing Sports is a confirmed fraud.

Last updated December 2021

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