The company said in a statement that it “discovered irregularities and violations of the Company's business conduct and internal control policies by an employee in the Company's newly introduced ‘Light Class’ business,” during a routine audit.
The company “suspects that the employee of question conspired with external vendors to wrongly inflate ‘Light Class’ sales by forging contracts and other documentations,” according to the statement.
TAL said "Light Class" sales accounted for approximately 3% to 4% of the company's total estimated revenues for the fiscal year ended Feb. 29.
The employee was taken into custody by the local police, the company said.
Shares of TAL fell $12.22, or 22%, to $43.60 in after-hours trading. ADRs of two other Chinese education companies, New Oriental Education and Technology Group Inc. (EDU) - Get Report and GSX Techedu Inc. (GSX) - Get Report, also fell sharply in late trading.
Last week, Luckin Coffee (LK) - Get Report ADRs lost about 80% of their value before being halted, after the company disclosed that it had launched an investigation into "fabricated sales" reports that could have totaled more than $300 million.