China Medicine Audit Committee dismisses auditor Frazer Frost

China Medicine Corporation (Other OTC: CHME.PK) (the "Company"), a leading manufacturer, developer and distributor of Western pharmaceuticals, traditional Chinese medicines ("TCM"), and other health products in the People's Republic of China, today announced that the Audit Committee (the "Audit Committee") of the Board of Directors of the Company (the "Board"), has dismissed Frazer Frost as the Company's independent auditor, effective August 16, 2011.

The audit reports of Frazer Frost on the financial statements of the Company as of and for the years ended December 31, 2009 and December 31, 2008 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. However, as previously disclosed, in connection with the preparation of the Company's financial statements for the year ended December 31, 2010, certain accounting and reporting errors were identified with respect to improper activities by certain employees of Guangzhou LifeTech Pharmaceutical Co. Ltd, a wholly-owned subsidiary that the Company. The Company has been conducting an internal review with respect to these matters and has observed similar errors at Guangzhou Konzern Medicine Co., Ltd., another wholly-owned subsidiary of the Company in fiscal years 2006 to 2010. In connection with the audits of the Company's financial statements for the fiscal years ended December 31, 2009 and 2008 and the subsequent interim period through August 16, 2011, except the matters mentioned above, there were: (i) no disagreements between the Company and Frazer Frost on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Frazer Frost, would have caused Frazer Frost to make reference to the subject matter of the disagreement in connection with their reports on the Company's financial statements for such years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

As the Company disclosed previously, its previously issued financial statements contained in its Annual Report on Form 10-K for the fiscal years 2006, 2007, 2008 and 2009, and the Quarterly Reports on Form 10-Q for the periods within the fiscal years 2006, 2007, 2008, 2009 and 2010 should not be relied upon and it expects to restate such previously issued financial statements. As a result, Frazer Frost did not review the Company's quarterly financial statements for the fiscal quarters ended March 31, 2011 and June 30, 2011.

The Company is in a process of finalizing the search of a reputable, international independent registered public accounting firm and will make a timely announcement when the search is complete and the engagement of a successor independent registered public accounting firm becomes effective.

SOURCE China Medicine Corporation