YASHENG GROUP
From : YaSheng Group
805 Veterans Blvd., 228
Redwood City, CA 94063
Tel-650-363-8345
Fax-650-3630462
Yasheng@yashenggroup.com
April 30, 2012
Tia L. Jenkins
Senior Assistant Chief Accountant
Office of Beverages, Apparel and
Mining
Securities and Exchange Commission
Washington, D.C. 20549
Re: Comment letter from SEC dated January 6, 2012
Form 10-K/A for fiscal year ended
December 31, 2010
Originally filed April 5, 2011
File No. 000-31899
Dear Ms. Jenkins:
This letter is in response to your comment letter referenced above. In this response and all others pertaining to the comments mentioned herein we (the company) acknowledge that:
| • | The company is responsible for the adequacy and accuracy of the disclosure in the filing; |
| • | Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| • | The company may not assert staff comments as a defense in any proceeding initiated by the Commission. |
In previous comment letters from the Commission the level of knowledge of and understanding of US GAAP of our accounting personnel has been examined. We have carefully reviewed our previous responses and have modified our thoughts with regard to our evaluation of our company’s internal control as of December 31, 2010. Although our higher level accounting personnel have received training in US GAAP this training had not, as of the date mentioned, filtered down to additional levels of accounting personnel. We are working to correct this situation.
The results of this new evaluation will be listed in an additional amended 10-K for the year ended 12-31-10 and shall read as follows.
Under Risk of doing business in PRC:
Our Accounting Personnel have limited experience with US GAAP
Our accounting personnel have been predominately educated and trained in PRC GAAP which is different from International GAAP and US GAAP. This lack of experience and training could cause possible confusion in the application of US GAAP, weaknesses in internal control, and cause delays in the financial statement preparation process.
Under Item 9A:
ITEM 9A (T). CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), to ensure that information required to be disclosed by the company in the reports filed or submitted by us under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Accounting Officer, or persons performing similar functions, to allow timely decisions regarding required disclosure.
In our last annual report for fiscal year 2009, we concluded our disclosure controls and procedures were not effective because we did not timely file our periodic reports. However, on August 13, 2010 we completed filing our past due periodic reports. What’s more, the company took active actions to remedy its disclosure controls and procedures, including but without limitation to, allocate more management and financial personnel with U.S. GAAP experience and outside financial counsels as well as supporting staff, to maintain and reinforce our internal controls and procedures. We monitor the disclosure controls and procedures through our internal self-assessments program. As a result, our reports have been filed on a timely basis after we finished filing our past due reports. Based on their evaluation, our Chief Executive Officer and Principal Accounting Officer concluded that as of December 31, 2010, our disclosure controls and procedures were not effective.
Management’s Annual Report on Internal Control over Financial Reporting.
History
In 2004 GanSu Yasheng Salt Industrial Group established Yasheng Group, a California Corporation to prepare for a listing on a U.S. public exchange, access international markets, and implement the company’s expansion plans.
On July 16, 2004, the Company entered into an agreement to acquire Nicholas Investment Company, and subsequently assumed its reporting requirements under the Exchange Act.
Subsequent to the acquisition and pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission, we elected to become the successor issuer to Nicholas Investment Company, Inc., for reporting purposes under the Securities and Exchange Act of 1934, and elected to report under the Exchange Act effective July 16, 2004.
Due to a lack of the PCAOB registered auditor, on September 6, 2006, we filed Form 15-12g, required by Rules 12g-4, 12h-3 and 15d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934. On March 15, 2010, we started this process by filing our Form 10-K for the fiscal year ending December 31, 2004. On August 13, 2010, we finished our past due filings.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2010.
As a Smaller Reporting Company, the Company is exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 which requires the independent auditor of a public company to issue an attestation report on the Company’s internal control over financial reporting and management’s assessment of those controls under Section 404(a).
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurances that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
The Hongxin CPA, an independent registered public accounting firm, has audited the consolidated financial statements of Yasheng Group for the fiscal year ended December 31, 2010, in accordance with the auditing standards generally accepted in the United States of America and with accounting principles generally accepted in the United States of America.
Changes in Internal Control over Financial Reporting
Since the first quarter of our 2010 fiscal year, we began to implement the remedial measures described above; including but without limitations to: hiring financial professionals and supporting staff in both U.S. and China; intensifying the interaction and cooperation between our U.S. and China offices; launching special employee training sessions with a focus on internal control; enhancing the design and documentation of our internal control policies and procedures to ensure appropriate controls over our financing reporting. This is an on-going process to improve our internal control and is not completed.
Excepted as described above, there were no changes in our internal control over financial reporting during our fiscal year of 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Thank you allowing us to respond and clarify.
Sincerely,
Changsheng Zhou
/Changsheng Zhou/
Chief Executive Officer of Yasheng Group