In a multi-layered, Foxconn-sprinkled update on its improving working conditions in Chinese factories, Apple has released its 2012 Supplier Responsibility Report, which claims to have found no underage workers in "any of our final assembly suppliers." But Apple's supply chain goes much deeper than that, and what the company found in the supply chain of its suppliers — the places that send Foxconn parts — came out less clean. "In many of the cases of underage labor we’ve discovered, the culprit behind the violation was a third-party labor agent that willfully and illegally recruited young workers," explains the report. In one plant that makes circuit-board components, Apple's auditors found 74 cases of workers 16-years-old and younger. Another huge labor agency, Quanshun Human Resources, forced parents of young children to forge papers in order to cover for its underage workers. While 95 percent of the factories Apple audited had no signs of child labor, the other 5 percent include more sordid stories.

When Apple finds a violation of its zero-tolerance policy on child labor, the company goes beyond eliminating it. "We go deep in the supply chain to find it," Apple senior vice president of operations Jeff Williams told Business Insider. "And when we do find it, we ensure that the underage workers are taken care of, the suppliers are dealt with." So Apple ended its business relationship with that circuit-board maker, and it disclosed to the Chinese government that the Quanshun labor agency had wrongfully documented underage workers, which resulted in the suspension of its business license and a fine; the children also went back to their families.

But Apple can only go so far down its supply chain. The report notes: "Apple also realized that a further 158 of the factories it uses were not auditing their own suppliers," an admission that reveals just how much of the company's process goes unchecked. Many factories have "for show only plants" to feign better working conditions than actually exist. And, as recently as 2006, these organizations were getting better at hiding the evidence. When Apple went back and checked that one circuit-board manufacturer, Apple was told Apple was actually the only company performing those second-hand audits. It appears that the iGiant will need nearly constant oversight to make up for what Chinese regulators can't.

Beyond these third-party suppliers' suppliers, Apple still doesn't have as good of a handle of its child-worker issue, the report suggests. While Apple reported finding not a single underage worker in its own factories, Foxconn admitted it had some 14-year-olds working in one of its plants earlier last year.