China Forestry Holdings (HKG:0930) announced that its board of director was notified by KPMG by way of a letter dated 30 December 2011 that KPMG would not stand for re-appointment as the auditors of the company upon the expiry of its term of office at the company's forthcoming annual general meeting. In order to facilitate the change of auditors and in turn, the commencement of work of the incoming auditors for the financial year ended 31 December 2011, at the request of the company, KPMG resigned as the auditors of the company with effect from 5 January 2012 by way of a letter dated 5 January 2012.

The board will fill the vacancy of KPMG as the auditors of the company as soon as practicable and will make an announcement in this regard.

In the KPMG letters, KPMG set out the circumstances leading to their cessation as the auditors of the company. What KPMG has pointed out included the following: "As detailed in our auditor's report dated 29 April 2011, we issued a disclaimer of opinion in respect of the Group's financial statements for the year ended 31 December 2010. This was due to the irregularities we identified during our audit and limitation in the scope of our work as described under the heading of 'Basis for disclaimer of opinion' in our auditor's report. Evidence obtained by us during the course of our audit for the year ended 31 December 2010 indicated irregularities with respect to the Group's accounting records and the transactions recorded therein. We reported our concerns to the Company's directors and audit committee. An independent board committee of the Company was established, whose findings cast serious doubt over the authenticity and reliability of records and documents of the Group and over the reliability of information and explanations provided to us by members of management as well as by parties external to the Group.

"In response to the irregularities identified, we requested the Company to extend the scope of investigations to identify all irregularities that may have occurred and all management and officers involved in the irregularities, trace where the Group spent the proceeds from the initial public offering and reconcile the details of recorded plantation assets. We are still awaiting the results of the investigations up to the date of this letter."