The SGX (Singapore Exchange) is investigating what appears to be another case of financial fraud. In a SGX regulatory column, SGX Chief Regulatory Officer Tan Boon Gin stated that the SGX was concerned about diminishing cash balances, assets or retained earnings of corporations operating in China, coinciding with China’s economic slowdown. Customer claims for compensation ten times larger in value than the original sales, writing-off of significant supplier pre-payments and loans to business associates, etc. are eroding the assets of these companies, portraying weaker financial positions than they really could be.

The Singapore Exchange is one of many market providers for emerging South-East Asian Economies colloquially dubbed “Tiger Economies”

The most likely cause is financial fraud. In the financial accounting discussions in class, we saw, for example, how weaker liquidity positions and large write-offs can result in low taxable profits and lower income tax charges, or grounds for government assistance. The SGX official cautions shareholders and boards of these companies to exercise due diligence with respect to management decisions that lead to questionable results, and replace executive officers or legal representatives, when required.

The SGX has stated that it will be bringing in a special auditor to evaluate the true status of these companies. Hopefully, this results in a thorough investigation, with fraudulent companies being held accountable.