A high-flying Chinese firm listed in Singapore lost over half a billion dollars in speculative oil trades in 2004.
China Aviation Oil (Singapore) Corp., lost 550 million dollars by betting wrongly on oil prices and sought court protection from creditors.
The jet fuel provider’s losses effectively wiped out its market value of 549 million US dollars.
Subsequent revelations that China Aviation Oil and its state-owned parent company in Beijing allegedly failed to disclose the bad investments as required have led analysts to question the Singapore Exchange’s oversight system.
Issues Arising:
Breach of laws, rules and regulations, e.g., breach of insider trading laws for failing to disclose the trading losses at the time of the share sale.
Corporate Governance, e.g., weak corporate governance within the company.
Considerations by Auditors:
~ Objectivity applied by auditors in evaluating evidence?
~ Reliance on management representation?
~ Professional Competence and Due Care?
~ Make reference to specific provisions in the Code and suggest possible breaches.
