There is no Unicode byte order mark. Cannot switch to Unicode

I am writing an XML validator with XSD.

Below is what I did, but when the validator reached the line while (list.Read()) it gives me the error

There is no Unicode byte order mark. Cannot switch to Unicode.

Can anybody help me fix it?

public class Validator
    {
        public void Validate(string xmlString)
        {
            Boolean bRet = true;
            string xmlPath = @"C:\x.xml";
            string xsdPath = @"C:\general.xsd";

            XmlReaderSettings Settings = new XmlReaderSettings();
            Settings.Schemas.Add("", xsdPath);
            Settings.ValidationType = ValidationType.Schema;
            Settings.ValidationEventHandler += 
               new ValidationEventHandler(SettingsValidationEventHandler);

            XmlReader list = XmlReader.Create(xmlPath, Settings);
            //StringBuilder output = new StringBuilder();
            while (list.Read()) 
            {
            }
            //File.WriteAllText(@"D:\Output.xml", output.ToString());
        }
        static void SettingsValidationEventHandler(object sender,
                                                   ValidationEventArgs e)
        {
            if (e.Severity == XmlSeverityType.Warning)
            {
                MessageBox.Show( "WARNING: ");
                MessageBox.Show(e.Message);
            }
            else if (e.Severity == XmlSeverityType.Error)
            {
                MessageBox.Show("ERROR: ");
                MessageBox.Show(e.Message);
            }
        }
    }

XML

<?xml version="1.0" encoding="utf-16"?>
<FlashList xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
           xmlns:xsd="http://www.w3.org/2001/XMLSchema" vin="xxxxxxxxxxxxx">
  <flash ECUtype="xxx" />
</FlashList>

XSD

<?xml version="1.0" encoding="utf-16"?>
<xs:schema attributeFormDefault="unqualified" 
           elementFormDefault="qualified"
           xmlns:xs="http://www.w3.org/2001/XMLSchema">
  <xs:element name="FlashList">
    <xs:complexType>
      <xs:sequence>
        <xs:element name="flash" maxOccurs="unbounded" minOccurs="0">
          <xs:complexType>
            <xs:simpleContent>
              <xs:extension base="xs:string">
                <xs:attribute type="xs:string" name="ECUtype" use="optional"/>
              </xs:extension>
            </xs:simpleContent>
          </xs:complexType>
        </xs:element>
        <xs:element name="Error" maxOccurs="unbounded" minOccurs="0">
          <xs:complexType>
            <xs:simpleContent>
              <xs:extension base="xs:string">
                <xs:attribute type="xs:byte" name="code" use="optional" />
              </xs:extension>
            </xs:simpleContent>
          </xs:complexType>
        </xs:element>
      </xs:sequence>
      <xs:attribute type="xs:string" name="vin"/>
    </xs:complexType>
  </xs:element>
</xs:schema>

The reality of your file's encoding appears to conflict with that specified by your XML declaration. If your file actually uses one-byte characters, declaring encoding="utf-16" won't change it to use two-byte characters, for example.

Try removing the conflicting encoding from the XML declaration. Replace