Moody's raises "red flags" on Sino-Forest and West China

Moody’s Investors Service (part of Moody’s, MCO.NYSE), a credit ratings agency, said that Sino-Forest (TRE.TSX) and West China Cement (1233.HK) were among emerging-market companies that raised “red flags” for corporate governance, Bloomberg reported. The ratings agency examined a set of 20 criteria that “highlight issues meriting scrutiny to identify possible governance or accounting risks for non-financial corporate issuers in emerging markets.” Sino-Forest triggered seven red flags, among them having over 30% of revenue from five customers, having its auditor and operations in separate countries, and doubling its total assets or revenue in three years. West China Cement raised 12 red flags, the most of any company reviewed. Sino-Forest in particular has come under scrutiny after a report in early June accused the firm of accounting irregularities.