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The mechanism research of the the supervision of of the the System of Independent Directors the false financial report

Author: GuanYaMei From: www.yourpaper.net Posted: 2009-05-29 01:51:35 Read:
Abstract: The independent director system play a regulatory role in the actual operation of the process, and enhance the effectiveness of the financial reporting, but also inevitably exist independent director is not independent "phenomenon. How to further independent director system perfecting, to strengthen on the the the regulatory of the Financial Reporting on the become a matter of great urgency, there is an urgent need the to solve the reality of problems.
Keywords: independent directors; false financial reports; oversight mechanisms

In recent years, China's accounting information distortion of a listed company's financial reporting fraud to the detriment of the interests of medium and small shareholders. Independent director system introduced in 2001 to restrict the largest shareholder of the behavior of investors, including the governance of the problem of false financial reports.

, The evolution process of the independent director system

. In the modern listed companies in the, the its will making asset entrustment maintenance was as a the shareholders of of the funders out to the operators management institutions carried out operation and management, and formed a principal-agent relationship so he in the the between the the shareholders and the operation and management organization. Principal-agent relationship in In addition to the between the the exist in the shareholders and the operation and management organization, but also exist in the at all levels of of the of listed companies, the such as the between the the Board of Directors and the general manager of, the between the general manager of and department managers, the between the department managers and the employees and so on. We can see from the agency relationship, the company's ownership and operation of separation. Largest shareholder by virtue of the advantages of equity to the Board, become a member of the Board of Directors. This can be used directly to obtain detailed and reliable accounting information, and supervising managers. Managers exercise of the company's day-to-day operation and management rights, the direct control of the company's accounting department, the command and control of accounting personnel, accounting and reporting behavior, so as to equip the company's adequate and reliable information. As the largest shareholder of the company managers and managers to control the generation and disclosure of accounting information. Minority shareholders away from the company's management, in the position of the outsiders of the company's management, the acquisition of information is at a disadvantage, and only indirectly to obtain the information. While the owners and operators exists between the the the contradiction of inconsistent the interests of in the between the, largest shareholder of and small business to be conducted thereat An. In the this kind of information the case of asymmetric of under the instrument, the largest shareholder of and operators In order to to their own the interests of, invaded and occupied the interests of the small and medium-sized the Shareholders as a, manipulation of Financial Reporting, to obtain the that the the the advantages of of the information to reap of their own interests, resulting in appear the the the problem of of the false financial report.
Independent director system shall have independent directors on the Board of Directors to form a system of checks and balances of power and supervision, supervision and standardize a system arrangement of listed companies. Independent directors, also known as in vitro directors, outside directors, as any other position other than a director in the company, and no interest and is employed by the listed company and its major shareholders. The purpose of justice, without any subjective interference supervision of the board of directors and the company's operations, the Board's decision-making process more democratic and scientific. The independent directors of listed companies as well as all the shareholders. Independent directors to fulfill the general duties of directors, but also to fulfill the following responsibilities: to help ensure that the Board should consider the interests of all shareholders, rather than a part of group interests; the independent judgments company strategy, performance, resources, including key personnel appointments and standards of conduct; review the performance of the board of directors and executive director of the intervention; executive director of a conflict of interest may exist.

Second, the independent director system to prevent fraudulent financial reporting

(A) the quality of financial reporting and independent director system. Listed companies in the provision of financial reporting, is necessary to take into account the interests of management of listed companies, but also taking into account the interests of shareholders, especially minority shareholders interests. Independent directors to coordinate and communicate the relationship between managers and shareholders, so play the role of a bridge, so that the transparency of listed companies' financial reports. Moreover, the independent directors to supervise the standardized operation of listed companies, thus improving the quality of financial reporting.
(B) the quality of financial reporting and the terms of reference of the independent directors. The Independent the Directors pursuant to the independent director system can be the effective discharge of the statutory privilege. Such as the boss material related party transactions should be independent directors recognized; independent directors hired the agency issued an independent financial consultant's report; collecting voting rights and powers of independent directors before the general meeting of shareholders of listed companies, so you can effective supervision of listed the company's operating management. Independent directors in addition to the above terms of reference, an independent opinion on the board of directors or the general meeting. Nomination, appointment and dismissal of senior management personnel appointment and dismissal; directors of listed companies and senior management salaries and compensation matters that may harm the interests of minority shareholders and independent directors. Independent directors able, the formation of the a kind of the effective supervision of, the authenticity of the of the report to the financial statements may has an important role, with the there was one vote the right of veto.
(C) the quality of financial reporting and the independence of independent directors. To give full play to the role of independent directors in improving the quality of financial reporting, the independent directors must be independent. Candidate by the board of directors of listed companies, the Board of Supervisors, a single species or jointly hold more than 1% of the outstanding shares of the listed company shareholders, minority shareholders can elect to represent their interests directors elected at the shareholders' meeting, the Board of Directors no longer dictated by the largest shareholder.
(D) the quality of financial reporting and the integrity of the independent directors. Independent directors in the rights at the same time have to bear the responsibility and obligation. Independent directors shall honestly, faithfully and diligently perform their duties in order to maintain the listed companies with the best interests of all shareholders. In the the for independence increase in the the Board of Directors and that self-The Directors,, be able to reduce the financial reporting fraud. The interests of independent directors to oversee the financial reporting, to ensure reliable financial reports are true, to prevent earnings manipulation and protection of minority shareholders has a positive meaning.

Third, the independent director system defects

(A) is "assimilation", there complicity. Adam Smith once said: "the directors of these companies are operating other people's money, not their own money, they can not, as a partner in the private partnerships usually take care of their money and be very careful to look after other people's money." through a period of collegiality and understanding, mutual assimilation is a common phenomenon. Independent directors in a longer period of time to work with other directors and management will establish their friendship and understanding, so make independent directors for their own interests, human relations are easily assimilated, is no longer independent or not sufficiently independent.
(B) difficult to implement an effective incentive. Independent directors as the economy, is bound to pursue their own to maximize the interests of a reasonable remuneration of independent directors to work harder. A way to is the adoption of the a fixed amount of the wages,. But this is very have a best likely to cause do not fair the phenomenon of. Some directors may vary their obligations, half-heartedly, and some directors are devoted, loyal and dedicated to make punctual, but the pay is the same. The fixed remuneration difficult to form an effective incentive for independent directors. Another method is closely linked to the remuneration of independent directors and the company's performance, but it will also bring a lot of problems: independent directors due to the good performance of the company's more lucrative rewards, could make the independent directors on the dependence a sense of loss of independence; independent directors are basically otherwise occupations, and more for the other senior management of the company, remuneration and company performance-based, independent directors is to maximize the benefits, you will spend more time in this company, so that other companies will certainly take measures to prevent its senior management as an independent director of other companies, will weigh the benefits refused to act. The Company in respect of very difficult to hopes of finding the suitable an independent director of. Currently, many listed companies mainly a sense of accomplishment and pride to motivate independent directors, usually to pay the remuneration, independent director general for their own interests, do not want to offend a substantial shareholder of, do not want to post real views. The credibility of the market in China has not yet formed, there is no evaluation of independent directors intermediaries is difficult to evaluate the independent directors of personal ability, integrity and loyalty. Therefore, the reputation of the role of incentives is very limited. (C) of the information asymmetry. We To effectively to play a the the decision-making of operations and the the supervisory role of of the of Independent Director System, the key lies in to let the independent Directors are timely access to of enterprise information and understanding of the company the situation, but is due to the The the restrictions of functions and powers between of the Independent Board so that they often this information is is difficult to get up to 30 credits for one referral!, And they access to information channels can only be the introduction of the directors and management and related records, so that incomplete and asymmetric information so that the information learned there may be false, misleading, risk of distorted ingredients. Independent directors because it is difficult to fully and accurately grasp the listed company operating a variety of information for the company's organization, culture and interpersonal relationships, it is difficult to maintain adequate sensitivity, and therefore, it is unlikely to effectively monitor the behavior of management .
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