While Deloitte's special audit should not be relied on to verify the financial statements (of 2010), it is not true that nothing can be relied on after the 2010 annual report.
The authenticity of the financial statements rests on 2 layers of scrutiny: Internal and External.
For internal audit and controls, we have Mr. Lim Cheng Kee. He is appointed since 2011 (following the 2010 saga), as the Independent director and Chairman of the Audit Committee. He even personally came to chair the AGM of 2012 to reassure shareholders. You may find his wealth of experience in the following:
investing.businessweek.com/research/stoc...P99%20HOLDINGS%20LTD
The company's external auditor, Mazars LLP, also gave a stamp of approval in its 2012 annual report. It is very plausible for Mazars to undertake additional due diligence, knowing very well that the company previously had an audit incident.
It is also interesting to note that Fujian Zhenyun's biggest 'S' shareholder is Ee Hock Leong Lawrence, who has the expertise in corporate governance and practices of listed companies in Singapore.
The current shareholders would likely know about the value of the company and hence do not rush to the exit even when other stocks tanked, as inspektordi has observed.
I remain bullish on the company and am patient to wait it out. The near term earnings should improve slightly as the company place additional focus on marketing and 'reaching out to well-established customers that have business operations across China'. I did not, however, add into the valuations as I prefer to remain conservative.
In response to inspektordi's last qn, as mentioned, the cash is discounted because the company did not put it to good use. The other reason is due to its internal controls. While it is difficult to make a comparison with other S-chips, I believe that the internal controls of Fujian Zhenyun has improved. For example, Deloitte's special audit mentioned about the "Absence of formal customers’ credit assessment procedures resulting in inadequate credit control". Since then, in its annual report, Fujian Zhenyun has recognised receivables as its main source of credit risk and has elaborated in detail on the credit evaluations. It is also noteworthy that its receivables has since improved.