Changyuan group was punished for financial fraud, signed “yin yang contract” and other ways to increase performance

At the end of 2018, the fraud incident of Changyuan group’s subsidiary was exposed. On the evening of October 23, Changyuan group announced that the company had received the decision on administrative punishment ([2020] No.7) and the decision on market Prohibition ([2020] No.1) issued by Shenzhen regulatory bureau of China Securities Regulatory Commission. Shenzhen Securities Regulatory Bureau decided to give a warning to Changyuan group and impose a fine of 500000 yuan; Yin Zhiyong was warned and fined 300000 yuan; Shi Xin, Liu Rui, Xu Xiaowen, Lu Erbing, Huang Yongwei and Ni Zhaohua were warned and fined 200000 yuan respectively. In addition, Shenzhen Securities Regulatory Bureau also decided to ban Yin Zhiyong from entering the securities market for 10 years, Shi Xin for 5 years and Liu Rui for 3 years. < / P > < p > according to the announcement, the Shenzhen regulatory bureau found that on June 7, 2016, Changyuan Group signed a share transfer agreement with 16 shareholders including Shanghai Heying Industrial Development Co., Ltd. to purchase 80% equity of Shanghai Heying Electromechanical Technology Co., Ltd. (later renamed as Changyuan Heying). On July 28, 2016, Changyuan and Eagle became the holding subsidiary of Changyuan group. Since August 2016, Changyuan group has incorporated Changyuan and Eagle into the scope of consolidated statements. After investigation, Changyuan and Eagle falsely increased their performance by fabricating overseas sales, recognizing revenue in advance, recognizing revenue repeatedly, signing “Yin and Yang contracts”, and project accounting not conforming to accounting standards, which resulted in false records in the financial data disclosed in the annual reports of Changyuan group in 2016 and 2017. In December 2015, Changyuan and Eagle exported 2048 suspension products to M.T. sewing machine center C0., Ltd. (hereinafter referred to as M.T. sewing), and the sales revenue was confirmed in March 2016. After investigation, both parties only agreed verbally that M.T. sewing would pay after selling the goods, and no payment was required if the goods were not sold. The goods will be stored in the warehouse leased by Changyuan and eagle in Thailand after customs declaration; until August 1, 2018, Changyuan and eagle will transport the above hanging products back to China. Changyuan and Eagle falsely increased the accounts receivable at the end of 2016 and 2017 by 8.7041 million yuan. < / P > < p > 2. From June to November 2016, Changyuan, eagle and their subsidiaries signed 8 hanging product sales contracts with 6 Cambodian companies, including JD & Toyoshima Co., Ltd., with a total contract amount of US $8.1909 million. In 2016, Changyuan and Eagle recognized revenue according to the contract amount. After investigation, Changyuan Heying and its subsidiaries have signed corresponding memoranda, letters of commitment or statements with the above six Cambodian companies, indicating that the Cambodian companies only assist in duty-free customs clearance and have no payment obligations. Changyuan and Eagle falsely increased the business income of 2016 by 56.6291 million yuan, and the total profit of 2016 was increased by 39.547 million yuan. < / P > < p > 3. From October to December 2016, Changyuan, yingying and their subsidiaries respectively signed sales contracts for hanging products with four Vietnamese agents such as ladogroup Corp, with a total contract amount of US $4.383 million. In December 2017, Changyuan Heying signed a hanging product sales contract with Vietnamese agent strongth sharp corporation0n, with a contract amount of US $977800. The above contracts all agree that the payment obligation will not arise until the agent has sold the products to the end customers. Changyuan, eagle and its subsidiaries shall have the ownership of the equipment before the agent pays off all the payment. It is found that during the performance commitment period, the above five agents only sold 1.8344 million US dollars of hanging products to end customers in 2017, but Changyuan and Eagle fully recognized the revenue in advance in the year of signing the contract. Changyuan Heying falsely increased the business income of 2016 by 32.3344 million yuan and the total profit of 2016 by 22.076 million yuan; the operating income of 2017 was reduced by 5.6596 million yuan, and the total profit of 2017 was reduced by 4.3237 million yuan. < / P > < p > 4. In November 2017, Changyuan Heying’s wholly-owned subsidiary and Eagle International Co., Ltd. (hereinafter referred to as Heying International) signed a US $930000 suspension product sales contract with the Cambodian customer Das Xing garment. In the case of no delivery, Heying international recognized the revenue according to the contract amount in December 2017, and the cost of sales was not carried forward. In March 2018, both parties agreed to terminate the contract, and Das Xing garment has not paid for the contract. Changyuan and Eagle made a virtual increase of 6.1412 million yuan in 2017 business revenue and 6.1412 million yuan of total profits in 2017. In 2017, Changyuan Heying Intelligent Equipment Co., Ltd, In the sales contract of hanging system signed with Nanchang Zhongmian Industrial Development Co., Ltd., Changyuan and Shanghai OTEC Intelligent Technology Co., Ltd., a wholly-owned subsidiary of Shanghai OTEC Intelligent Technology Co., Ltd., agreed that delivery shall be deemed to be completed after delivery of the goods to the carrier; in the product sales contract signed with Jihua 3539 shoe making Co., Ltd, It is deemed that the other party agrees to purchase the cutting machine and other equipment if it fails to return it after the probation period. After investigation, the relevant goods were not actually sold out of the warehouse, but Heying equipment still recognized the revenue. Changyuan and Eagle falsely increased the business income of 2017 by 156400 yuan and the total profit of 2017 by 156400 yuan. According to the final survey results, Changyuan and Yingying are the main culprits of financial fraud. The punishment document shows that Liu Rui, the executive vice president of Changyuan and eagle, reported fraud through others and thus reduced the punishment. According to the data, the main business of Changyuan group is power industry, intelligent factory equipment and electronic industry. In the first half of 2020, the net profit attributable to shareholders of listed companies was about 97.42 million yuan, with a year-on-year increase of 26.47%. The operating income was about 2.361 billion yuan, with a year-on-year decrease of 18.48%. The basic earnings per share was 0.0746 yuan, with a year-on-year increase of 24.75%. < / P > < p > Disclaimer: the purpose of this article reprinted by china.com finance and economics is to convey more information and does not represent the views and positions of the website. The content of this paper is for reference only and does not constitute investment advice. 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