Chapski & Chapski, CPAs, LLP, is a local forensic accounting firm in the metropolitan Detroit, Michigan area.  For more information on us, please visit our web-site.  We have written articles regarding short ideas on the Seeking Alpha web-site.  One of our other subject companies previously covered in depth, Syntax-Brillian Corporation, filed for bankruptcy on July 8, 2008 and has been subject to multiple lawsuits alleging fraud.

Disclosure: We typically have a short position in the stocks that we write about.

Our Take on Lihua!

On December 9, 2009, we received the 2008 financial reports that Lihua Electron filed with the Chinese government.  In those reports, Lihua Electron reported that their profit tax was zero.  According to their SEC financial statements, Lihua International, Inc., the owner of Lihua Electron, paid $1.8 million for income taxes during 2008.  One of these sets of numbers, the 2008 Lihua Electron SAIC financial reports or the 2008 Lihua International, Inc. SEC financial statements, has to be incorrect.  In order for the SEC financial statements to be correct, Lihua paid the Chinese government $1.8 million for income taxes during 2008 yet reported zero in profit tax to the same Chinese government.

This anomaly regarding the profit tax cannot be reconciled and leads us to conclude that the 2008 SEC financial statements are incorrect.  If the 2008 SEC financial statements are incorrect, then future financial statements are also incorrect due to the carryover effect of the balance sheet.  Comments can be left for the appropriate article/instablog on the Seeking Alpha web-site.