The recent string of scandals at Chinese companies listed in North America should be a wake-up call for both the listing authorities and investors. Their failure to pay sufficient attention to corporate governance and accounting is stoking a confidence crisis.

Nerves have already been shredded at Sino-Forest. Shares in the Canadian-listed company, which has interests in Chinese forestry, slumped earlier this year after a US research firm, Muddy Waters, published a report accusing it of massively inflating its earnings and assets. Although Sino-Forest last week published an internal report rebutting the claims, investors remain unconvinced. The irony is that worries about its financial health now threaten to trigger a liquidity crisis.

Sino-Forest is only one of a number of accounting scandals to damage China-based companies. These include China High Precision Automotive, which suspended its shares after KPMG said it could not form an opinion on its financial statements because it had not been given access to key papers. The auditors to another tech company, Longtop Financial, resigned after identifying numerous instances of fraud at the company. Such spats are creating a paradise for short sellers.