Bank statement fraud in China

This is what a Professor of Accounting at Peking University has to say about auditors and  Chinese bank statements:

If a company is intent on committing fraud, the bank confirmation process is a major threat to their activities.  If you are stealing money from the company, you can’t very well disclose that.  If you are inflating revenues, sooner or later you need to move the receivables into cash or people will start asking questions. Frauds often end up with overstated cash balances.  To cover up those frauds, the fraudsters need to generate fake bank statements and corrupt the confirmation process. Generating a fake bank statement is easy enough – a few minutes on Adobe Acrobat and Photoshop will do it."


"The problem seems to be the relative ease in corrupting low level branch officials at Chinese banks.  The evidence from the cases cited above indicates that auditors simply cannot rely upon local bank confirmations. This is a major problem for China’s entire auditing industry, not just the small portion that serves U.S. listed Chinese companies. "

http://www.chinaaccountingblog.com/weblog/auditing-cash-in-china.html

DYOR