Duoyuan's troubles began last September, when the company dismissed its auditor, the Chinese affiliate of Deloitte, the Big Four firm. According to Duoyuan, Deloitte's auditors had asked to review original bank documents so they could "verify the identity of certain individuals and entities associated with third party distributors and vendors."
Duoyuan refused and then fired the firm. It has yet to find a replacement. Meanwhile, the company's share price has tanked by more than 80% from its highs of about $10, set last year.
Deloitte discovered other problems as well. During its audit of company financials, "Deloitte received information regarding certain distributors and vendors that appeared inconsistent with certain information that the Company had provided," Duoyuan said in its filing.Last year, amid the burgeoning scandal, which also saw the resignation of Duoyuan's CEO, CFO and the chair of its audit committee, the company's founder and chairman had a conference call with investors. "We're hearing suggestions that our company may be a fraud," he said during the call. "It is a very serious suggestion, and I want to be clear from the start that this is false. I'm confident that when the independent investigation is completed, these suggestions will be shown to be completely and totally untrue." Based in Beijing, Duoyuan Printing sold shares on the NYSE in November 2009 in an offering underwritten by Roth Capital and Piper Jaffray. -- Written by Scott Eden in New York
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