Tungda was a manufacturer and distributor of lighting products. It was listed on Hong Kong’s Growth Enterprise Market in 2002. Allegations that Tungda had fabricated sales, in particular overseas sales, were made to the Hong Kong Exchange soon after the IPO. In June 2004, the company announced a delay in its results for the year to March 2004. The SFC started an investigation and the shares were suspended in July 2004. The results eventually published in October 2004 included a disclaimer from the auditor, Deloitte, as to whether the accounts gave a true and fair view. The auditor was unable to satisfy themselves as to the validity of overseas sales transactions, almost all of which were satisfied by cash deposits in Hong Kong. They were also unable to establish the validity of amounts paid for PP&E. It seems that cash was being roundtripped to inflate sales. Deloitte resigned following the audit and were replaced by Ting Ho Kwan and Chan, who provided a qualified opinion in 2005, albeit just in relation to a limited number of sales for which the supporting documentation was lacking. Time on the scam was finally called when the police raided the company’s offices in March 2005, and arrested the Chairman together with his son and brother, who were also directors. The Chairman and his brother, as well as several others were subsequently convicted of fraud.
Tungda Innovative Lighting: Annual Report 2002/2003