Sino-Forest Corporation -Executive Summary Formed in 1994, Sino-Forest held a majority interest in Omnicorp Limited (changed to Greenheart Group),

an investment holding company listed in Hong Kong (HK: 0094) that claimed to import wood fiber into the Peoples Republic of China (PRC). Sino-Forest conducts business as a forest plantation operator in PRC. Its principal businesses included ownership and management of forest plantation trees, the sale of standing timber and wood logs, and complementary manufacturing of downstream engineered-wood products. On June 2, 2011, Muddy Waters LLC issued a report alleging that Sino-Forest is a ponzi-scheme and a near total fraud. The MW Report was issued publicly and immediately caught the attention of the media on a worldwide basis. Subsequent to the issuance of the MW Report, the company devoted extensive time and resources to investigate and address the allegations in the MW Report. The Company was a public holding company and the largest forestry company whose common shares were listed on the Toronto Stock Exchange (TSX). Prior to August 26, 2011 (the date of the Cease Trade Order), the Company had 246,095,926 common shares issued and outstanding and trading under the trading symbol TRE on the TSX. Sino-Forest had a market capitalization of just over $5 billion in November 2010. On March 30, 2012, Sino-Forest filed for bankruptcy protection in Canada, and on May 9, 2012 the companys stock was delisted from the TSX. This report will demonstrate how Sino-Forest had committed the fraud, how the fraud was discovered, the accounts that were affected in accounting principle, and the companys resolution efforts with respect to the fraud. Furthermore, it will analyze the recent financial

statement of Sino-Forest (2011 Sino Forest Annual report) by using and relating the chapters we learned and discussed in class.

Fraud -Starting the fraud and accounts were affected The fraud was first discovered on June 2011, when short-seller, Carson Block, and his investment firm, Muddy Waters, LLC, published the report. Muddy Waters report charged SinoForest with drastically overstating its assets and defrauding the public. According to Muddy Waters, Sino-Forest was committing fraud from the very beginning, but, there were not enough similar frauds to raise investors awareness. In the beginning, Sino-Forest claimed to have a fastgrowing and profitable joint ventures in China when there wasnt anything in reality. At the start of the Sino Company (TRE) in January 1994, Sino entered into an equity joint venture (EJV) agreement with governmental agency, Leizhou Forestry Bureau. TRE was agreed to hold 53% of the equity and Leizhou 47%. TRE was to contribute its 53% of the investment in cash in phases and inject 15% of the registered capital within three months of incorporation and the balance within 2 years. In 2000, TRE converted the EJV to a wholly foreign-owned enterprise (WFOE), which was officially licensed to producing and selling wood products. As a result of the termination of the EJV in 1997, TRE reported reimbursement from Leizhou through a series of installment payments of logs; 730,440 cubic meters of standing timber. TRE claimed to have collected receivables in the amounts of $1,125,000 in 1999, $1,063,000 in 2000 and a large collection of $10,242,000 in 2003, totaling $12.43 million in accounts receivables (Muddy Waters). At the

start of the company, their account receivables were fabricated leading to an overestimate of accounts receivables and inventory. In 2003, Sino-Forest became much more aggressive about growing the fraud. Basically, Sino-Forest operated through a series of authorized intermediaries (AIs). TRE disclosed to investors that it was forced to use AIs to handle its sales because it lacked the proper licensing to sell wood chips and wood based products domestically. TREs AI structure was to buy logs, turn them into woodchips, and then sell them to customers, and then pay Sino-Forest a cut of end profits. Through AIs, Sino-Forest booked revenue and profits, but did not commit capital to purchase the logs, did not enter into contracts to purchase the log from suppliers, did not take title to the logs, and etc. Instead, the company agreed to reimburse the costs of the AI, including the cost of the purchase of raw timber and to pay processing fees. However, all of the aforementioned fees are deducted from the sales proceeds of the wood chips. In other words, Sino-Forest would not pay any money because the AI would be reimbursed when it sold the chips. Also, Muddy Water says, Sino-Forest assumed risk and obligations only during period when the wood is waiting to be chipped. For this invaluable service, the AI paid TRE a fee on a net basis after withholding of applicable taxes by the AI. In other words, there was no tax documentation that can be used to confirm whether Sino-Forest actually received any money in this way. Through the AI system of revenue recognition, the AIs were responsible for remitting the VAT tax. Sino-Forest generated substantial revenue this way and was able to apply the same principles to a model that allowed it to raise billions of dollars more. This model is dealing in standing timber. With standing timber, Sino-Forest claimed that they have purchased under various master purchase agreements since 2006, timber costing $2.891 billion. However, the

evidence shows that TRE overstated purchases from Yunnan agent, Gengma Dai and Wa Tribes Autonomous Region Forestry Co. Ltd., which appears to be a legitimate agent, by approximately $800 million. The purchases made under Yunnan master agreement is overstated by approximately $800 million. Also TRE announced in March 2007 that it had entered into a master agreement to purchase up to 200,000 hectares of plantation tress in Lincang City, Yunnan Province. Muddy Waters claimed that this was a fraud. To expose this fraud, Muddy Waters compared official documents with reality on the ground. The approval letters state that TRE has entered into an agreement to acquire 6,667 ha (300,000 mu) of forest plantation in Lincang City. TRE acquired 75,000 mu in 2007 from Gengma Forestry Co. Ltd. The Yunnan agent told us that after TRE completed this purchase, it helped TRE acquire another 13,333 ha (200,000 mu) in the nearby Lincang counties of Mengding and Cangyuan. Also, TRE claimed to own a wood processing facility, with the production capacity of 50,000 cubic meters of Micro Density Fibre Board (MDF) per year from 8,000 hectares which was stated to produce 80,000 cubic meters of MDF (Muddy Waters). TREs main source of revenue was from sale of plantation fibre, trading of wood logs, and manufacturing and other operations (MD&A, 2011). However, lest there be any about that the approvals omitted the other 160,000 ha that TRE claim is covered under the agreement, information about the local economy and forest industry make it clear that TRE did not enter into agreements to acquire such a large amount of forest, and at such a high per unit price. (Muddy Waters) .Muddy Waters says that TRE overstated the per hectare cost by about four times. Muddy Waters provided another example. Via an agent called Guangxi agent: Zhanjiang Bo Hu Wood Co, Ltd., TRE supposedly purchased a plantation worth $646.6 million. However,

the firm Bo Hu Wood was only formed right before it went into business with TRE and was thinly capitalized, and was not registered to deal in forestry, and did not operate in the right province, and though it had huge revenue, it was initially based in this apartment complex. The EJV never reached normal operations, the plans for a manufacturing facility, and additional land use or forest acquisitions were never executed. TRE intentionally overstated their asset and equity accounts to show profitable operations. Even though the EJV was terminated, TRE recorded revenues as a result of the EJV, overstating purchases, receivables, and revenues. From the use of AIs, TRE was able to conduct a number of related and unrelated cash payments, giving them to ability to launder money without being questioned. In Muddy Waters words, TRE steals the money and its a Ponzi. This is only a slice of allegations and Muddy Waters provides more allegations on its report. The bottom line of its report is that SinoForest always started off as fraud and it overstated its assets and it has raised $2.9 billion through the capital markets without ever having paid out a cent.

- The resolution with respect to the fraud Following the release of a negative research report by Carson Block of Muddy Waters Research, Sino Forests share plummeted by 82% on June 2 2011 (Ontario Securities Commission, 2011). Sino Forests stock had traded at around 18 Canadian dollars prior to Muddy Waters releasing its report. After the report, it dropped as low as 2 Canadian dollars. Muddy Water report claimed that Sino Forest had been fraudulently inflating its assets and earnings, and that the company's shares were essentially worthless. Following the situation, Sino Forest rejected the allegations of fraud and launched an independent committee, which has been set up to examine and review the allegations contained

in Muddy Waters' report. This independent committee had appointed PricewaterhouseCoopers LLP as the independent international accounting firm to assist with the investigations. Sino Forest had spent five months and $35 million for investigating the companys business practices (Hoffman, 2011). Sino Forest asserted that its independent committee report verifies the companys stated cash balances, confirms registered title or contractual rights to the Company's stated timber assets, as well as the book value of these assets, reconciles reported total revenue and refutes the allegation of subsidiary companies (CNW, 2011). Sino Forests investors hoped it would clarify whether the company committed fraud. However, it showed that there was no consensus on what constitutes fraud, and what simply normal business practice in China is. The 111 page in this report still left a pile of questions on the table: the two of the most crucial information (how does Sino Forest business work, and with whom, does it buy and sell trees?). Ontario Securities Commission (OSC) wasnt also convinced with the committee report. Our preliminary review has firmly suggested that our investigation, which is ongoing, should continue, said Tom Atkinson, the OSCs director of enforcement. The committee report could not positively affect to recover Sino Forests reputation and stock price in the market. Before Sino Forests independent committee report came out, OSC issued a temporary cease trade order against Sino-Forest, which prohibits all trading in the securities of Sino-Forest in Ontario, on August 26 2011. The order was initially effective for 15 days, but it has extended until Sino Forests shares were delisted (Ontario Securities Commission, 2011). On November 10, 2011, the Globe and Mail reported that the Royal Canadian Mounted Police (RCMP) had launched a criminal investigation into whether executives of Sino-Forest defrauded Canadian investors. On March 30, 2012, Sino-Forest Corporation sought and was granted protection from its creditors pursuant to the federal Companies Creditors Arrangement Act (CCAA). This is

insolvency legislation and the initial order provides for a stay of legal proceedings against the company. Sino Forest also showed its restructuring efforts. On April 17 2012, Sino forest announced that it has fired top three executives as well as accepted the resignations of others including Chief Financial Officer (LuVanessa, 2012). Following by the bankruptcy protection Sino-Forests shares were delisted from the Toronto Stock Exchange (TSX) on May 9, 2012 (Koskie Minsky LLP, 2013). Emerald Plantation was a new company formed to receive substantially all of the assets, including its subsidiaries, of Sino-Forest Corporation following the implementation of the CCAA Plan of Compromise and Reorganization on 30 January 2013 as approved by the Ontario Superior Court of Justice on 10 December 2012 (Emerald plantation holdings, 2013). There was no new accounting reporting requirement that enacted as a result of Sino Forests fraud. However, Ernst & Young showed the importance of sufficient audit work. Ernst & Young was former auditor of Sino Forest between August 16 2007 and April 4 2012 when resigned from the role. According to WSJ (DummettBen, 2013), an Ontario court approved a settlement agreement that Ernst & Young to pay 117 million Canadian dollars to settle all claims against it as former auditor of Sino Forest. It is the largest settlement by an auditor in Canadian history. The OSC also accused in December Ernst & Young of failing to adequately audit the forest-products company's financial results between 2007 and 2010. According to the OSCs allegation which against Ernst & Young, Ernst & Young failed to perform sufficient audit work to verify the ownership and existence of Sino-Forests most significant assets. OSC Staff also allege that Ernst & Young failed to undertake their audit work on Sino-Forest with a sufficient level of professional skepticism.

Financial Statement of Sino Forest -Chapter 19: Accounting for Income Taxes To calculate income taxes, first, we have to know revenues and expenses of the company. We can find these components by looking at the financial statement of the company. In year 2010, Sino-Forest has revenue of $1,923,536. To calculate income tax, first, we have to find out the companys income before income taxes. We can find income before income taxes by subtracting all the costs and expenses from the income. The company has cost of sales of $1,252,023, selling, general and administrative expense of $89,712, depreciation and amortization expense of $5,145, interest expense of $128,124, interest income of $10,609, exchange losses of $3,086, loss on changes in fair value of financial instruments of $4,419, and other income of $2,932. In the result, the income before income taxes will be $1,923,536 $1,252,023 - $89,712 - $5,145 - $128,124 + $10,609 - $3,086 - $4,419 + $2,932 = $454,568. Sino-Forest has income before income taxes of $454,568 and expected statutory tax rate of Canada of 31%. So, expected income tax expense in 2010 is $ 140,916. Then, we have to reduce this amount by all the deductibles. The company has amount of $924 from recovery related to unrecognized tax loss carry forwards and amount of $924 from unrecognized income tax benefit arising from losses of the company and its subsidiaries. Also the company has amount of $66,526 from losses for which there is no tax benefit and amount of $136,798 from income tax at lower rates in foreign jurisdiction. So, if we calculate income tax expense for 2010, $140,916-$924+$924+$66,526-$136,798, the amount is $70,644 with effective rate of 15%. In financial statement, the amount reported as tax expense will often differ from the amount of taxes payable to the IRS. It is because GAAP and IRS have different tax principles. So, this different tax principles results in temporary differences in income tax.

A temporary difference in income tax is the difference between the tax basis of an asset or liability and its reported amount in the financial statements that will results in taxable amounts or deductible amounts in future years. Deferred tax liability represent the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year. Deferred tax asset represents the increases in taxes refundable in future years as a result of deductible temporary differences existing at the end of the current year. If you see the companys financial statement, the company has deferred tax asset amount of $48,298 from tax losses carried forward. Then, the company has unrealized foreign exchange on external debt of $3,961, unrealized foreign exchange on receivable of $6,074, and financial costs of $4,348. These components end up with net future tax asset of $54,759. The calculation is $48,298 - $3,961 + $6,074 + $4,348 = $54,759. Then the company has valuation of allowance. For temporary differences, we recognize deferred tax assets for all deductible temporary differences. However, we then reduce a deferred tax asset by valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized. A future deductible amount reduces taxable income and saves taxes only if there is taxable income to be reduced when the future deduction is available. So, valuation allowance is needed if taxable income is anticipated to be insufficient to realize the tax benefit. Sino-Forest uses the liability method of accounting for income taxes. Under this method, future tax assets and liabilities are determined based on differences between the financial reporting carrying value and tax basis of assets and liabilities. Future income tax liabilities and assets are calculated using the substantively enacted tax rates and laws that are expected to be in

effect when the differences are expected to reverse. Future tax assets are evaluated and, if realization is not considered more-likely-than-not, a valuation allowance is provided. The company evaluates a tax position for uncertainty in income taxes using a two-step process. Step 1 Recognition requires the company to determine whether tax position, based solely on technical merits, has likelihood of more than 50 percent that the tax position taken will be sustained upon examination assuming appropriate tax authority has full knowledge of all relevant facts. Step 2- Measurement, which is only addressed if step 1 has been satisfied, requires the company to measure the tax benefit as the largest amount of benefit, determined on a cumulative probability basis that is more-likely-than-not to be realized upon ultimate settlement. Thus, after we get net future tax asset of $54,759, we have to reduce net future tax asset by valuation allowance because the realization is not considered more-likely-than-not. The amount of valuation allowance is $54,759 and the amount of future tax liability on fair market value increments on acquisition is $63,906. Consequently, the company has net future tax liability of $63,906, which means the company has deferred tax liability of $63,906 in the future. The calculation is $54,759 - $54,759 - $63,906 = -$63,906. Then we record net future tax liability of $63,906 on the balance sheet under long-term liability section. If company has net operation loss, the federal tax laws permit taxpayer to use the losses of one year to offset the profits of other years, this is called carry back or carry forward. Net operation loss occurs when tax-deductible expenses exceeds taxable revenues. The federal tax law allows to carry forward for 20 years and carry back for 2 years. As at December 31, 2010, Sino-Forest has income tax losses of approximately $125,188 tax reporting for which no accounting benefit has been recognized and which can be applied

against future years taxable income in Canada. As I mentioned earlier, the losses can be carry forward for 20 years, the losses will expire as follows: $1,031 in 2010, $14,406 in 2014, $21,907 in 2015, $16,743 in 2026, $2,372 in 2028, $21,834 in 2029, and $46,895 in 2030.

-Chapter 23: Statement of Cash Flow The 2011 Sino Forests statement of cash flow provides information about Sino Forests cash receipt and cash payments during 2010. It also provides cash-basis information about Sino Forests operating, investing, and financing activities during 2010. Furthermore, the statement of cash flow provides information to help assess Sino forests ability to generate future cash flows, ability to pay dividends and meet obligations, reasons for difference between net income and net cash flow from operating activities, and cash and noncash investing and financing transactions. Income statement transactions will use in operating activities section. Change in investments and long term asset items will use in investing activities section. Changes in long term liabilities and stockholders equity will use in financing activities section. Although there are two different method (direct and indirect) for operating activities, this report will use only indirect method for evaluating Sino Forests operating activities due to academic purpose. Cash inflow may come from sales of goods or services and returns on loan (interest) and on equity securities (dividends) in operating activities. Cash outflow may come from suppliers for inventory, employees for services, government for taxes, lenders for interest, and others for expenses in operating activities. According to Sino Forests 2011 annual report, cash flow from operating activities of continuing operations shows that net cash from operating activities increase to $840.1 million in 2010, compared to $784.5 million in 2009. The increase in net cash provided by operating activities was due to an increase in cash provided by operations $1,173.6

million. Cash out flow was due to the increase in cash used in working capital that mainly resulted from the increase of accounts receivable $333.5 million, in 2010. Cash inflows may come from sales of property, plant, and equipment, sale of debt or equity securities of other entities, collection of principle on loans to other entities in investing activities. Cash outflows may come from purchase property, plant, and equipment, purchase debt or equity securities of other entities, make loans to other entities in investing activities. In 2009 and 2010, cash flows used in investing activities shows that cash flows primarily used for capital expenditures to purchases to purchases additional forestry plantations, investments in manufacturing facilities and other assets. According to Sino Forests 2011 annual report, the cash outlays for the forestry plantations amounted to $1.4 billion in 2010 and $1.0 in 2009. The cash outlays for the manufacturing facilities and other capital assets amounted to $25.2 million in 2010 and $11.6 million in 2009. The cash outlays for other assets amounted to $43.3 million in 2010 and $38.0 million in 2009. The non-pledged shot term deposits decreased by $21.9 million in 2010 and increased by $10.9 million in 2009. The 2011 Sino Forests annual report states that Sino Forest also received $296,000 and $216,000 from the disposal of capital assets in 2010 and 2009, respectively. Sino Forest obtained a net cash inflow of $2.1 million related to business acquisitions in 2010. However, Sino Forest paid $200,000 during the acquisition of convertible bonds of Greenheart Group in 2009. Cash inflows may come from sales of equity securities and issuance of bonds and notes in financing activities. Cash outflows may come from pay dividends and redeem long term debt or treasury stock. In 2010, cash flows from financing activities consisted of net proceeds from the issuance of common shares of $8.6 million, an increase in bank indebtedness of $48 million, a decrease in pledged short term deposits of $17.2 million, an increase in long term debt of

$624.8 million and net proceeds from the exercise of share options of a subsidiary of $3 million, offset by the payment on deferred financing costs from the issuance of the 2014 Senior Notes of $20.3 million and the repayment of a long term debt of $0.5 million. In 2009, cash flows from financing activities consisted of net proceeds from the issuance of common shares of $652.5 million, an increase in bank indebtedness of $36.5 million and an increase in long term debt of $460 million, offset by the payment on derivative financial instrument of $5.8 million, the payment on deferred financing costs from the issuance of the 2014 Senior Notes and the 2016 Convertible Senior Notes of $27.6 million, repayment of long-term debt of $150 million and an increase in pledged short term deposits of $13.6 million. Sino Forests 2011 annual report came out on March which is before releasing Muddys report in public. Based on this annual report Sino Forest is on healthy financial status. It increased its cash by $661.2 million in 2009 and $ 121 million in 2010. Since global economy was recession by the 2008 financial crisis, it was good result. Cash account tells lots of things to suppliers, investors and creditors. It also measure the ability of liquidity in short term, efficiency, and assets allocation.

-Chapter 24: Full Disclosure in Financial Reporting For the most part, TRE displays many violations of the full disclosure principle. For the majority of its time as a public company, TRE has displayed poor internal corporate control, starting with their Board of Directors. TREs board consists of former auditors from Ernst and Young based out of Canada, which gave TRE an unqualified opinion in 2011. TRE failed to report to their investors, that two of their board members are a part of TREs auditing team, allowing for ineffective internal audits. This arrangement makes fraud easy to commit and

harder to detect, and would allow TRE to overstate their inventory accounts and earned revenue. TRE is believed to have been created to help form a retirement fund for former Ernst and Young partners (Muddy Waters). TREs financial statements show increased revenue for their first three years of operations as a result of the EJV, generating $55 million in revenue from the venture (Muddy Waters). The EJV was terminated due to TREs failure to fill full its capital obligation. Their failure to contribute capital which caused the termination was not disclosed in TREs financial statements. After the termination of the EJV, TRE continued to overstate receivables and inventory of over $12 million, stating that as a result of the termination, they were entitled to reimbursement of logs from Leizhou Forestry from 1999 to 2003 (Muddy Waters). Rather than providing reliable financial information to investors, TRE intentionally overstated financial benefits from the venture. TRE lied about the EJV claiming profitable benefits. The EJV was the foundation of TREs continued fraudulent behaviors. The installment payments received from Leizhou between 1999 and 2003 were overstated to have collected $12.43 million in total receivables to their stockholders equity account. Management was in charge of settling both the accounts receivables and payables; showing mainly accounts receivables from TRE entities and payables to TRE entities. TREs lack of internal control made fraudulent reporting easy to accomplish. Starting in 2003, through the use of AIs, TRE treated the AI as being both the supplier and the customer in transactions to create events to record on financial statements and avoid paying a VAT tax. The AI (acting as the supplier) would purchase the raw timber (logs) and deliver them to a shipping facility. Once the logs were in the shipping facility, TRE would claim assets and liabilities only during the time when the logs were waiting to be chipped. The AI (acting as the

customer) would process the logs into woodchips, deliver to customers, and then collect payment (Muddy Waters). TREs complex system of revenue recognition is what helped TRE to launder money to undisclosed parties. This system was basically the tunnel used to move money to subsidiaries without having proper documentation to show whether or not they were actually receiving inventory. Their unusual and complex system gives TRE the opportunity to create fraudulent transactions and make detection of fraud difficult. TRE explained to investors that the AI model came into being because TRE could not form the WOFE needed to conduct business even though they were closing down an existing WOFE which was qualified for such sales. The new WOFE was said to be created through one of its cooperative joint ventures (CJV) with Heyuan and Guangxi, which TRE claimed a 193% increase in revenue. This increase was discovered to be an overstatement of $16.1 million (Muddy Waters). TRE created a complex, unnecessary structure to make fraud easy to commit and harder to detect, while also failing to disclose an existing entity already qualified to conduct business. This development also helped TRE to make inappropriate cash payments to related and unrelated parties. Since 2006, TRE claimed to have purchased $2.891 billion worth of timber under master agreements, through the use of AIs. In 2007, TRE claimed to have purchased $800 million worth of timber from Yunnan province at $4,865 per hectare, which was four times the actual purchase price, resulting in an overstatement of TREs purchases/inventory. As a result, TRE claimed to have sold $231.1 million worth of timber from Yunnan province (Muddy Waters). The AIs did not require TRE to show VAT invoices which allowed TRE to make up sales figures without being exposed to the tax bureau. Therefore, TREs revenue structure allowed them to launder money without having documentation to prove it. Until recently, only one AI

has been disclosed to investors. Four other agents were discovered to be, undisclosed parties, having nothing to do with the forestry industry, and claimed to have entered into master agreements with TRE, and reported to generate millions in revenue. All agents were reported to make substantial payments to TRE entities, none of them being forestry related, none of them disclosed accurately in their financial statements. As a result of their fraudulent reporting, their financial statements show good ratios of liquidty, solvency, and profitability from their 2011 financial statements. According to 2011 financial statements, TRE reports excellent working capital ratio of 2.75, with collecting receivables only 4 times a year (every 89 days). In 2011, they also have an excellent asset turnover, collecting $0.67 for every dollar invested in their long term assets. TREs rate of return on sales shows great profitability at 20.55% and 13.79% rate of return on assets (MD&A, 2011). TRE intentionally reported fabricated increases in revenue from an EJV that was never put into operation. TRE claimed to have made successful profits without a manufacturing facility or the land needed to produce MDF in the first place. TRE claimed to have purchased $2.891 billion in standing timber under master agreements since 2006 and overstated their inventory account by $800 million (Muddy Waters). TRE moved substantial amounts of cash to subsidiaries of TRE and unrelated parties (AIs), which TRE did business with to launder money. TRE then gives fraudulent and limited data to Poyry to produce its reports. TRE violated the full disclosure principle.

-Conclusion Sino Forest Company created their own financial statements to intentionally mislead investors and creditors to the reality of their operations. Their profitable financial reporting can

be attributed to their many acts of fraud. TRE massively exaggerated their assets, claiming substantial amounts of revenue during the duration of their operations. TRE created an unnecessary and complex revenue structure to use as a tunnel to move cash to unrelated parties. TRE purposely failed to follow the full disclosure principle of financial reporting. TRE failed to report reliable data leading to their inevitable bankruptcy. Through this report, we have learned the importance of management and auditors role and ethical standards. If Sino Forests management and auditors conducted their duties correctly based on ethical responsibility, the Muddy Waters report wouldn't come out as well as Sino Forests bankruptcy.

-References CNW. (2011, November 15). newswire. Retrieved from newswire: http://www.newswire.ca/en/story/877567/sino-forest-announces-findings-of-theindependent-committee Dummett, B. (2013, March 21). Ontario Court Approves Ernst & Young Pact In Sino-Forest Class Action. Retrieved from WSJ: http://online.wsj.com/article/BT-CO-20130321707997.html

Emerald plantation holdings. (2013). Company Profile. Retrieved from Emerald plantation holdings: http://www.emeraldplantationholdings.com/company-profile/ Hoffman, A. (2011, November 25). The Globe and Mail. Retrieved from The Globe and Mail: http://www.theglobeandmail.com/globe-investor/sino-forests-business-model-stillshrouded-in-fog/article4181019/ Koskie Minsky LLP. (2013). Sino-Forest corporation. Retrieved from Kmlaw: http://www.kmlaw.ca/Case-Central/Overview/?rid=143 Lu, V. (2012, April 17). Sino-Forest fires executives, while others resign. Retrieved from the star: http://www.thestar.com/business/2012/04/17/sinoforest_fires_executives_while_others_resig n.html Ontario Securities Commission. (2011, Jung 2). OSC. Retrieved from OSC: http://www.osc.gov.on.ca/en/home.htm "Muddy Waters Initiating Coverage on TRE.TO, OTC:SNOFF Strong Sell." Muddy Waters Research. <http://www.muddywatersresearch.com/research/tre/initiating-coveragetreto/>. Sino Forest. (2011). 2011 Sino Forest Annual Report. Ontario: Sino Forest.