Listed company's accounting fraud of the Causes and Prevention1773 .doc

Listed company's accounting fraud of the Causes and Prevention        ABSTRACT from the analysis of accounting information distortion that is illegal, because the accounting fraud, manifestations and hazards start to analyze the accounting fraud of China's listed companies the motivation to find out the real causes of the accounting fraud, and through drawing and learn from foreign countries in the prevention and treatment of accounting fraud experience, to present my accounting fraud prevention and treatment response.         Key words listed company; accounting fraud; Governance         1, the listed company's accounting fraud and harm the performance of the form         (A) the manifestation of accounting fraud         1. Fictitious business activities.         Listed companies, the most common means of accounting fraud, namely through the fictitious transactions, increasing sales revenue or other income, and inflated assets. Such methods often need to forge economic contracts to cope with bills, tax invoices, customs declarations and a series of legal documents, which not only had violated accounting rules is contract law, tax law and other important economic laws and regulations of the open defiance and provocation, is of a serious nature economic crime.         2. Manipulation of related-party transactions.         Fraud, fictitious companies, apart from economic activity, more by way associated with particular transaction, such as debt restructuring, asset replacement, non-monetary transactions, etc. to achieve the purpose of manipulating results. In a normal transaction of the related-party transactions is justified, earlier this without too many restrictions and regulations, but in recent years, an increasing number of listed companies by the trade name, line of actual control.         3. Accounting methods distort.         Compared with the first two types, the use of some special methods of accounting distortions reflect the business situation, manipulation of accounting information of false acts were committed abroad in cases of accounting fraud is more prevalent.         (B) the hazards of accounting fraud         Intensified the listed company's accounting fraud had been to the country's economic, political, and cultural fields caused immeasurable losses.         1. All kinds of departments for distortion of accounting information will lead to macro-decision-making out of control, seriously affect the industrial structure optimization, the rational allocation of social resources and the orderly flow of weakening the authority of state laws and regulations, and have serious social economic problems.         2. The impact of accounting information users make the right investment decisions, damages the interests of investors and creditors, and has hit investor confidence and affect the healthy development of capital markets and undermine the investment environment.         3. Resulted in state tax revenue and a huge loss of state-owned assets, affecting the management of production and operation to make the right decisions, undermining the normal production and operation enterprises.         4. Disrupt the market rules of the game, increased market speculation and market volatility, severe damage to primary and secondary equity.         5. Accounting fraud contributed to a variety of corruption and unhealthy trend. According to statistics, China's due to fraud and corruption resulted in economic losses and consumer welfare losses are estimated annually 978500000000-12 between 57 billion yuan, accounting for 13.6% of China's GDP of around 16.8%.         All these have seriously affected our normal social and economic order, and hinder China's market economy and a steady, healthy and rapid development.         Second, the accounting fraud cause analysis         (A) lack of clarity of property rights         The reason why China's current accounting fraud to become a common phenomenon, one of the causes is the enterprise business system in transition, the relationship between property ownership are not clearly defined, leading to the original functions of supervisory authority has been weakened, but on behalf of corporate property rights monitoring body has not been established. Therefore, the problem of accounting fraud will be more prominent.         (B) inadequate corporate governance structure         As the shareholding structure of China's stock market congenital defects, so that listed companies in China and Western countries are generally characterized by state-owned shares 'due to the dominance' of the shareholding structure, thus resulting governance structure of listed companies, including shareholders, board of directors, board of supervisors of mutual checks and balances between the distorted.         (C) the accounting legislation is not perfect         Since December 1990 China's Shanghai Stock Exchange since its inception, has successively promulgated and improve the 'Company Law', 'Securities Law' and a series of laws and regulations, but the effect of the practical implementation point of view, there are still more serious defects. First, regulations promulgated lagged behind the development of practice, legislation appears to be more passive, passive 'plugging holes', the lack of predictability. Second, the operability of laws and regulations is not strong and poorly enforced, especially prominently reflected in the right CPA ineffective sanctions against persons outside the law, the law often to accept the administrative punishment instead of civil liability to pay a small fine instead of confiscation of all ill-gotten gains and additional heavy fines, 'accounting' provides the maximum individual amount of the administrative penalty is 5 million units of a maximum of 10 million, this right is negligible penalties for counterfeiting is difficult to produce for other offenders, deter others from role.         (D) low level of Certified Public Accountants Management         90's onward, as the domestic market economic system have been established and improved, in particular the expansion of the securities market to adapt to the needs of the CPA profession has been rapid development. However, the development of China's accounting profession has, after all, is only 20 years of history, as compared with the economically developed countries there is an obvious gap. Mainly reflected in: (1) practicing low level; (2) unfair competition in the grave; (3) the lack of certified public accountants 'independence'.         Third, prevention and management of accounting fraud countermeasures         (A) improve the internal governance structure         1. To establish an effective incentive mechanism. At present, China's incentives for executives behind, most are still stuck in the traditional system of on wage earners, managers and employees with the company effective combination of income level is not high, from the legal point of explicitly allow and encourage companies shares as incentives, and allow management to achieve the business goal to increase its shareholding.         2. To protect the rights of small shareholders. To completely change China's Listed Companies 'major shareholders' control over the phenomenon, monitor major shareholders, board of directors and executives of the acts must protect the legitimate rights of small and medium shareholders. Should therefore take effective measures to encourage small shareholders to participate actively in general meeting of shareholders, such as the collection agency to establish the right to vote on behalf of shareholders of Dazhong Xiao Guang-listed companies involved in major decision-making participation in voting; a well-compensation mechanism.         3. To ensure the independence of independent directors. Increase in the proportion of independent directors in the board, established under the Board of Directors composed mainly of a special committee of independent directors to effectively bound by the acts of controlling shareholders and managers; improve the existing system of independent directors to its corresponding rights and obligations to do a clear division of powers and responsibilities to facilitate consistent; establishment of an independent director of an incentive mechanism for independent directors to provide reasonable remuneration to the pursuit of long-term interests of the listed companies concerned about the performance and development prospects. Reposted elsewhere in the paper for free download http:/         (B) strengthening the construction of enterprise internal control system         Listed companies should re-establish the status of internal audit, internal committee set up to play its supervisory role over financial reporting, internal audit and an independent board of directors to the board of supervisors composed of the audit committee so that the Audit Committee, the board of supervisors and internal audit should be among the independent channel of communication and information communication; through the distribution of powers, checks and balances, and information disclosure mechanisms, in-house control mechanisms to reduce the risk of accounting fraud; in checks and balances agency side and large shareholders accounting information on the rights, the implementation of duties not compatible with the system to prevent cross-representation of senior management.         (C) improve the accounting legislation         1. Establish a sound civil compensation system. We can draw the United States 'Sarbanes-Oxley Act' experience, mandatory for companies in respect of its issued by the company's accounting information to make "personal written certification" to the responsibility of the concrete implementation of accounting information to individuals; in law, such a legal system can be implemented in the general shareholders 'civil suit for compensation' to give evidence, and thereby mobilize the interests of the people's enthusiasm to prosecute counterfeiters and to increase deterrence.         2. To increase penalties for accounting fraud. 'Sarbanes-Oxley Act' of accounting fraud were made by a series of severe penalties, such as senior management of related companies suspected of accounting fraud, if the maximum is liable to a fine of five million U.S. dollars, or 20 years in prison. Moreover, China's relevant laws and regulations on accounting fraud accounting of the United States far less punishment. Therefore, China should establish a strict senior managers of listed companies, the economic sanctions regime; increase individual staff of the accounting fraud criminal penalties, so that false those who deserve punishment.         (D) specification of CPA         1. To improve and standardize the CPA fees, accounting firms cut prices to reduce competition in space, the full implementation of a limited liability partnership (LLP), raising the cost of illegal accounting firms.         2. Improve the listed company's audit commissioned by the admissibility of the system and implement auditing by the SFC, the AICPA agreed to appoint the tender system.         3. To implement the audit of listed companies rotation every three years to replace the mandatory accounting firms, certified public accountants and listed companies so as not to be too close and lost independence.         4. The establishment of a civil compensation mechanism of Certified Public Accountants, Certified Public Accountant due to collusion fraud or gross negligence of listed companies which failed to find significant accounting fraud, resulting in losses of investors and creditors, it shall bear civil liability.         To sum up, China's current economic development is at a critical period, credit, regulate the economic development of the soft environment for development and growth of China's listed companies as well as large enterprises to become an international model has important practical significance, through the listed company's accounting fraud of the Research will also apply to China's accounting profession and related fields provides a theoretical support for the reforms so as to better create a harmonious development of society.         References:         1劳伦福克斯 . Weathered the ups and downs M. Mechanical Industry Press, 2004.         2 Yin Ping. Financial fraud monitoring and detection of M. China Financial and Economic Publishing House, 2004.         3 Huang Shizhong. Public Company Accounting fraud causes the proliferation of defects in the system J. Shanghai Securities News, 2002.         4 Zuo Zhi-min, LI Ming-hui. The Public Company Accounting fraud causes and countermeasures J. Henan Higher Commercial College, 2002, (5).         5 Luo Yu Wei. Public Company Accounting fraud Origin J. Shaoyang College, 2005, (6).         6 Ming-Hui Li, Qu Xiao-hui. China's listed company's financial report on the legal responsibility of a questionnaire survey and analysis J. Accounting Research, 2005, (5).         7 Liu Shu-wei. False accounting statements of listed companies to identify the M. Shanghai: Technical and Economic Science Press, 2003.         9 Chen Zhiwu, Yang Lin. Who exposed the Enron J. Finance, 2002, (1).         10 Qin Jiangping. Public Company Accounting Fraud: Overseas research overview J. Accounting Research, 2005, (6). Reposted elsewhere in the paper for free download http:/