Canada regulator probing China's Zungui Haixi

Fri Sep 16, 2011 7:38pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Euan Rocha

(Reuters) - Chinese clothing and footwear company Zungui Haixi Corp said on Friday that Canada's top securities regulator has started to investigate it after the company's auditor flagged accounting concerns last month.

The company did not provide any details on the Ontario Securities Commission investigation. The OSC on Friday issued a 15-day trading halt on the shares, with immediate effect, pending a hearing on the matter.

Zungui is one of many China-focused companies with North American listings to come under pressure recently due to reports of accounting irregularities. The company's auditor, Ernst & Young, suspended an audit of the company in August, pending a probe into certain issues it had identified.

On Friday, Zungui said that the concerns raised by Ernst & Young relate in part to "inconsistencies in bank documents and the inability to obtain bank confirmations in a manner acceptable to the auditors."

Zungui, which sells athletic footwear, apparel and other accessories in China, said in August its audit committee would address the matter via an independent investigation.

The committee of independent directors that is investigating will also address any issues regarding earlier financial statements, the company said.

Zungui said the special committee, composed of board members Patrick Ryan, Margaret Cornish and Elliott Wahle, has been given full authority and broad powers, and that there is no deadline for it to complete its investigation.

The company said the committee has had a number of discussions with Chief Executive Yanda Cai and other insiders, in the past four weeks, seeking their cooperation and assistance.   Continued...