China Growth Stocks

[ccsykes]

Rato, Chinese filings are rarely going to match. In a few cases they may but most the time there will almost always be small differences. Mainly due to the differences between Chinese accounting and GAAP, there is quite a difference.

I did a bit of research into the matter and spoke with several people, especially people in China. The general consensus was most Companies hire a filing firm and don't really take their SIAC filings very seriously. The SIAC is basically the same thing as the Secretary of State in the U.S.

Also certain types of transactions in China require tax stamps, so the tax is in essence paid before hand. That is pretty common in industries such as Agriculture. The buyer burdens the tax before hand through tax stamps and the Company is typically tax exempt under China law. Looking at the SIAC issue in such a general manner is going to give you a false read on the reality of SIAC filings in China. Simply put the SIAC issue has really been blown way out of proportion.

Auditors, as I have said several times before, are only as good as the audit manager doing the work. The majority of "Big 4" audits are conducted by staff with limited experience. The audit managers are typically at a "Big 4" only as long as their resume needs them to be.

My sister in law is an audit manager with about 15 years experience working in a PCAOB enviroment. I know a little about the audit world. My thoughts from awhile back.

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=58129212&txt2find=auditor

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=58129212&txt2find=auditor

As can been seen over and over with Companies like CCME, having a "big 4" doesn't garuntee you any saftey. There is always going to be some level of fraud exposure with ANY investment. Obviously that level is quite a bit higher with a Chinese issuer. So, one should consider that when looking at their risk exposure.

For example, SIAF's auditor may be considered a nobody audit firm, but they do have experience working in China. They were listed in a recent report issued by the PCAOB on China RTO's here:

http://pcaobus.org/Research/Documents/Chinese_Reverse_Merger_Research_Note.pdf

With a smaller firm, you at least know the PCAOB will have a better chance of catching something as opposed to a huge audit firm. You can also rest comfortably knowing the PCAOB is doing something about the China RTO issues. As with SIAF's auditor, they were inspected in Decemeber 2009 and the review is here.

http://pcaobus.org/Inspections/Reports/Documents/2009_Madsen_Associates.pdf

Bottom line, the best way to conduct due diligence is to either have someone in China you can trust to look things up. Or become profecient with Chinese characters and research companies based on their Chinese names. The best method is obviously checking the Company out personally which unfortunatley is not something everyong can do. For an investor serious about the CGS space, one could use a freelance site such as Odesk.com and actually hire someone in China to do the research for them.

Good IR can also make a difference by bringing in as much visibility about the Company forward as possible. Through good IR efforts you can attract genuine sophisticated investors. Once you get a few true sophisticated investors involved and not some short sighted PIPE lender the game can change dramaticaly. It comes as no suprise that the majority of SIAF's shareholders are now mainly from Sweden and Europe. SIAF has very few U.S. investors anymore.. and to be quite honest that's not such a bad thing.