Fraud, again.

China's stock market has been hit by another scandal involving a company that inflated its books to be listed.

While the company, Wanfu Biotechnology (Hunan) Agricultural Development Co Ltd, and relevant intermediary agencies must receive their due punishments, regulators must reflect on how such a fraudulent company managed to get through the IPO procedure.

The China Securities Regulatory Commission said on April 3 that investigations showed the company started falsifying its books as early as 2008 in preparation for its listing, which was completed in 2011.

The company's shares first traded in September 2011 at a price of 25 yuan ($4) per share. The price slumped to 5.04 yuan a share at the close of trading on Monday, which means big losses for the 7,000 or so investors in the company, most of whom are individuals.

The company, however, raised 425 million yuan through its IPO, making its directors multimillionaires in the past years.

From 2008 to 2011, the company inflated its revenues by a total of 740 million yuan and net profits by 160 million yuan. In 2011, its real net profits were only 1.1 million yuan while it claimed they were 60.3 million yuan.

The case has made the headlines as one of the most serious frauds in China's stock market history.

The CSRC has vowed to mete out punishment in accordance with the law, and analysts said the company could be forced to delist from the market and some of the directors may face criminal charges.

But even if this turns out to be the case, this will not quell the anger of the investors that were cheated, because the company and its management are not the sole wrongdoers.

The underwriting, accounting and legal agencies involved in Wanfu Botechnology's IPO have clearly failed to carry out their responsibilities of due diligence and will face investigation, according to the CSRC.

While the investigation is yet to be completed, the responsibilities of those intermediaries are obvious. Given their professional capabilities, it is impossible that they would not have found the financial loopholes in the company's books at the pre-listing stage.

Wanfu's underwriter was Ping An Securities, the securities arm of China's second-largest insurer Ping An Insurance Group, which was involved in another fraud case. The listing application of Hunan Shengjingshanhe Distillery Stock Co Ltd was cancelled by the CSRC after it was found to have whitewashed its books.

Given its poor record, Ping An Securities should receive harsh punishments.

The investigation should not stop there, however.

Based on open information, altogether seven members of the CSRC's stock listing approval committee participated in the approval procedures for Wanfu Biotechnolgy. They are all senior accounting and legal professionals and it is hard to believe they were not able to spot the financial problems in the company's books. So the public is eager to learn why they gave the green light to Wanfu Biotechnology's application.

If the stock listing approval committee cannot clarify its role in the process of listing approval, it is reasonable to suspect that many other companies may also have listed fraudulently.

The Chinese stock market has long been accused of irregularities, and to clean it up harsher punishments must be meted out to companies that falsify their financial data and those that enable them. Punishments must be made harsh enough so that the price of cheating is too high to afford.

At the same time the regulators themselves must become more accountable for their role in approving companies to be listed.

The author is a senior writer with China Daily. E-mail: xinzhiming@chinadaily.com.cn