Abstract
The research investigates alleged material misstatements in the financials of Luckin Coffee, a Chinese company listed in NASDAQ. The research is exploratory and based on publicly available information. The financial data has been obtained from their quarterly and annual reports submitted to Securities and Exchange Commission. The research shows the alleged corruption by inflating sales and profits by C-suite executives of the company. Nevertheless, before doing so, what failures in corporate governance led to this crisis? The admission of such material misstatements resulted in a massive loss to the investors and shaken the investment community’s trust once again. The research tried to determine what kind of audit procedures should have been implemented to earlier detection of fraud? What should have been done to protect stakeholders? What extra measures should the U.S. stock exchange take into consideration before listing foreign companies? What kind of ethical standards must be taught to the students/future executives to avoid such material misstatements? How can accounting bodies address such material misstatements? How can audit procedures be improved? This research will facilitate the policymakers, accounting and auditing regulators, board and various other stakeholders to deter, detect and mitigate such financial material misstatements and offers recommendations. 
 JEL Classification Codes: M41, M42, M48, M148.
Highlights
In October 2017, the war of market share of coffee sales started in China after the foundation of Luckin Coffee, a new startup, by Jenny Qian Zhiya
Jenny wanted to introduce coffee as part of life to the Chinese people. She believed that tea drinkers dominated the Chinese market, yet there were ample opportunities in the untapped coffee market
Jenny always gave credit to caffeine for her ability to work overtime in her jobs. She was in the firm belief that there is space for another coffee selling company that can position itself in front of international coffee market players such as Starbucks and Costa
Summary
In October 2017, the war of market share of coffee sales started in China after the foundation of Luckin Coffee, a new startup, by Jenny Qian Zhiya. Jenny always gave credit to caffeine for her ability to work overtime in her jobs She was in the firm belief that there is space for another coffee selling company that can position itself in front of international coffee market players such as Starbucks and Costa. Still, they stated that “they are long LK” as research findings do not “mesh” with current data. The CEO and COO were fired, and “Wall street bets” lost his life savings when the stock sunk as much as 81% when the fraud conducted by LK’s COO and other employees was on every financial headline Their internal investigation found that 2.2 billion yuan inflated sales from the second quarter to the fourth of 2019 (Business News, 2020). The information verified by corroborating evidence and comparing the information from other sources
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