Empirical Analysis of Financial Fraud Identification in Chinese Listed Companies
As the carrier of accounting information, financial report reflects a company’s financial status, operation and cash flow, and receives abundant attention from the beneficial bodies like the shareholder, creditor, and governmental department etc. However,
- PDF / 66,376 Bytes
- 6 Pages / 439.37 x 666.142 pts Page_size
- 96 Downloads / 271 Views
Empirical Analysis of Financial Fraud Identification in Chinese Listed Companies Aijun Yi and Huajiang Dai
Abstract As the carrier of accounting information, financial report reflects a company’s financial status, operation and cash flow, and receives abundant attention from the beneficial bodies like the shareholder, creditor, and governmental department etc. However, in China, from the establishment of capital market, financial report fraud is rampant. The financial crisis last year further aggravated the situation. It severely impairs sound development of stock market. The article starts from the theoretical basis for financial report analysis, analyzes the current situation of financial report fraud in listed companies and the harms, elaborates on common methods of fraud and identification methods from the aspect of financial report and annotations, analyzes the cause of fraud in the listed companies based on common risk factors and individual risk factors, proposes prevention measures, and explains how to prevent financial report fraud taking Kelon Electric case as example. Keywords Listed company • Financial report fraud • Risk factor of fraud
61.1
Introduction
The word “financial report fraud” is no longer a strange word to us. It has become a common phenomenon in the current stock market. The non-strong form efficiency of the capital market determines the possibility of its existence [1]. The fraud situation in China is quite severe: from the Yuanye (field) company fraud case in the 1990s, there were Qiongminyuan, Hongguang, Eastern Boiler, Macat, Yinguangxia, Eastern Electronics and Kelon cases etc. Recently, a case was filed against Wuliangye by China Securities Regulatory Commission. Besides, there are numerous cases. The investors suffered great losses, their enthusiasm in
A. Yi (*) • H. Dai HuaiHai Institute of Technology, Lianyungang, China e-mail: [email protected] S. Zhong (ed.), Proceedings of the 2012 International Conference on Cybernetics 475 and Informatics, Lecture Notes in Electrical Engineering 163, DOI 10.1007/978-1-4614-3872-4_61, # Springer Science+Business Media New York 2014
476
A. Yi and H. Dai
investment is affected, and the policy fair, justice and transparency of the stock market are violated. The stock market thus fails to play the role for optimum resource arrangement and the sound sustainable development of economy is impeded [2–4]. Therefore, to prevent financial report fraud is urgently required. Though some researchers have done lots of research and got research findings, the fraud behavior has not got essential changes. The financial report fraud cannot be done by the enterprises alone. There are other mechanisms cooperating for their fraud. This has become a social problem. Like what the former president of the US SEC, Arthur Levitt pointed out in the speech Number Game, the listed companies are facing the pressure from the profit expectation, thus they place the daily business activities at the subordinate position. Managers, auditors and securities analyzers coope
Data Loading...
