A committee tasked to review the books of Sino-Forest, which claims to be China's biggest logging firm, but is accused by a short-seller as a 'near total fraud', has issued a second interim report refuting the allegations. But the report said the review, expected to be completed before the end of the year, had encountered 'numerous challenges', including the lack of government registry of forestry rights on the mainland. This meant confirmations from forestry bureaus, which are not officially recognised, were obtained, instead. Some 'situations' suggesting the firm may have close relationships with certain suppliers and intermediaries that had claimed to be independent, were subject to further review, it added. Documentation of 'set-off arrangements' between Sino-Forest, suppliers and intermediaries could not be independently verified. So far, US$35 million has already been spent on the review. The committee, comprising three independent directors of Sino-Forest, said it was 'satisfied that its expected cash position existed', after forensic accounting advisers from Pricewaterhouse Coopers checked 28 of its 293 bank accounts, representing 81 per cent of its expected cash position. The report said the review had also confirmed registered title or contractual rights to the firm's timber assets and their book value, and reconciled last year's reported total revenue. 'We can categorically say Sino-Forest is not the 'near total fraud' and 'Ponzi scheme', as alleged by [US short-seller] Muddy Waters,' said chief executive Judson Martin, who took over from the forest plantation operator's founder Allen Chan Tak-yuen in August. However, the degree of independence of the committee from the Sino-Forest management has been questioned by the Ontario Securities Commission and Sino-Forest's external auditors Ernst & Young, the report said. This is because third parties had been reluctant to co-operate for the review, and much of the committee's work was done with the assistance of Martin and his management team. Muddy Waters also cast doubt on the review's credibility. 'It should be noted that all three directors who oversaw the investigation are defendants in shareholder lawsuits, and one of the three resigned just prior to this release [of the second interim report]. We believe this release has no credibility,' a spokesman said. The Ontario Securities Commission in late August halted trading of Sino-Forest shares and last week the Royal Canadian Mounted Police said they were investigating the company.