(China Green Agriculture story updated to include further details from the J Capital research report.)

NEW YORK ( TheStreet) -- Shares of China Green Agriculture ( CGA) closed 10% lower Tuesday after a small equities research firm issued a report accusing the company of fraud.

The firm, Beijing-based J Capital, said in its report that it had found "compelling evidence that China Green Agriculture ... has vastly inflated the sales and profit figures it reports to investors."

China Green closed Wednesday at $8.11, down 10.4%, on volume of more than 3 million shares, six times the daily average turnover in the name.

J Capital cited financial records filed by China Green with a Chinese government bureau called the State Administration of Industry and Commerce, or SAIC. Those filings show that China Green Agriculture's main operating unit took in revenue of $8.4 million in calendar 2009, J Capital said in its report. The company reported revenue for the same period of $41.8 million to the Securities and Exchange Commission, according to the report.

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In September, China Green issued a press release defending the accuracy of its filings in the U.S. "It is well documented that reports filed with the SAIC often do not reflect the comprehensive income and financial condition of a company," China Green said in the press release.

China Green executives weren't immediately available for comment Wednesday, but the company's U.S.-based spokesperson referred TheStreet to that earlier press release.

The use of SAIC records to demonstrate fraud has been criticized by long-side investors in Chinese small-caps. Some defenders of the stocks say that different accounting methods are used in China, and that results in the sometimes enormous discrepancies. Others on the long side say that filing accurate records with the SAIC is simply not taken seriously in China.

In its own report, J Capital addressed that contention. "Few companies simply lie on their SAIC filings," the report said. "The government audits company books annually and would rescind the license if such a large discrepancy were found."

J Capital contends that its own research into China Green's business "supports the $8 million figure as roughly accurate." Based on this, the report asserts, shares of the company are worth "no more than $2.85 a share."

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