Inflating Revenues in China Stocks and How To Avoid The Fraud
Inflating revenues is another common way fraud is being committed in China Stocks.
The most simple way is to fake the receipt of revenues. The company has to show more money coming into the bank than really has.
It’s a simple matter of getting a bunch of fraudulent invoices from the black market, and putting the revenues on your books.
From there, these fake revenues have to be reflected in your banks statements as well, so you need fraudulent bank statements.
This is a simple matter of creating the statements and presenting them to your examiner with the “Bank Chop” seal already stamped. Of course, you’ve obtained a fake stamp for about $200.
It’s common to claim receivables that don’t exist. You claim to have shipped a product, and the buyer is in on the conspiracy. When called by the examiner, the buyer confirms the purchase, but he has, of course, been bribed in advance to cooperate.
China stock fraud going on in the China livestock industry
There’s a lot of fraud going on in the China livestock industry where sales are double counted. For example, and pork producer might sell a whole generation of baby pigs to local farmers. They raise the pigs, and sell them back to the pork producer, who then sells them to an end buyer. The hogs were never really sold to the local farmer, and the sale of the livestock is double counted. Since this is the same animal, this is not allowed under GAAP accounting standards.