Adjustment（调整） 9: Under-accrued social insurance and housing fund（住房公
• The Target only contributed social insurance for some of its employees, and did not contribute housing fund for most of its employees. And for the employees for whom the Target contributed social insurance and housing fund, the Target reported and paid social insurance based on regional minimum salary rather than the actual salary paid to employees, which was not complied with the relevant government regulations.
• Nevertheless, under-accrued social insurance may expose the Target to risks of being claimed for compensation by staff, or payment of the under-reported amount and related penalties.
• Based on the limited information provided by management, we roughly estimated potential under-accrual of social insurance and housing fund using total salary cost provided by management to be approximately RMB1.9M and RMB2.4M in FY06 and YTD Nov-
07, respectively. We have proposed an adjustment accordingly. (please note that the proposed adjustment did not include any potential penalties).
