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Chinese listed companies' financial false form of reason and Countermeasures

Author: ZongWenJun From: www.yourpaper.net Posted: 2009-07-20 13:15:27 Read:
Abstract: In recent years, as China's capital market continues to grow, more and more of the national economy, the pillar enterprises and industry leaders in succession issue listed, and play a pivotal influence in the national economy. However, due to the sound system and the supervision of the capital market in China, resulting in a speculative environment. Analysis of its root causes false forms of the listed companies' financial problems, and for the status quo governance measures.
Keywords: listed companies; financial false; forms; reasons; countermeasures

The form of a listed company's financial false corporate profits

(1) by the non-operating activities increased net profit. Such as the sale of assets, the sale of investments, changing investment accounting methods to improve operating income or investment income, and other activities.
(2) through the false sales in advance to confirm sales or intends to expand credit to adjust the total profit. These sales can not be made in cash, so when the enterprise these phenomena, the occupier of the receivables will increase performance on financial indicators, on the one hand reflects receivables accounted for the increase in the proportion of current assets, on the other hand may also reflected in the accounts receivable turnover ratio decreases.
(3) the expenses or losses that have occurred postponed confirmation. Enterprises to adopt to postpone confirmation expenses or losses, business losses are the cost will rise, resulting in increased proportion of capitalized costs, such as prepaid expenses, deferred assets, intangible assets and other similar long-term assets.
(4) the use of related party transactions adjusted profit. If this phenomenon is relatively common manipulation ROE, it will be reflected in the proportion of related party transactions accounted for sales revenue or cost of sales of these enterprises difference related parties receivables and receivables models larger proportion.

2 Listed Firms in Committing fraud root cause analysis

The 2.1 huge interests temptation
Because of China's special economic environment, many of the shares of the company are the restructuring of state-owned enterprises from. Some state-owned enterprises successful restructuring eligibility stock issued to the public, to play tricks on the asset evaluation and financial statements in order to approval by the Securities Commission. Not only the enterprise itself enjoyed this kind of fraud, and also tend to support the local government to do so. Both to raise a considerable amount of funds to resolve the funding difficulties because of joint stock companies, but also the development of the local economy, and improve the results of the work of local government. With the support of the government, the other problems will be solved, like assets assess the registered public accounting firm, law firm generally will not be contrary to the intention of the government and enterprises, not to mention also get a substantial amount of income, so , smooth clearance of false financial information has become an easy thing.
Therefore, China's shares in the company from the beginning to set up to apply for listing, and the listing has financial fraud from private capital markets, a strong desire for more money, which is the main reason for the false accounting information of repeated. But shares of the company to achieve its purpose, must first audit by certified public accountants that hurdle. Regrettably, however, some certified public accountants for their own economic interests, not only failed to play the role of the economic police, but play the role of siding with the bully.
2.2 low cost of illegal
Cost accounting fraud violation in China's capital market performance disclosure probability is very small, even if they are exposed, the punishment is not big enough, the opportunity cost of illegal small. Around the company's accounting information fraud involves a lot of units and personnel, some could have been law enforcement, but not seriously enforce the law, but with the company complicit partner of cheating, fraud information more covert, increase the difficulty of the investigation and handling . In addition, under the current legal system, the liability of the company management authorities providing false accounting information close to zero, you do not have to bear any legal responsibility for the decline in profits in the company after the listing of, at best, published a paper statement of apology.

The 3 listed company of false accounting information governance

3.1 to improve the corporate governance mechanism, the establishment of effective checks and balances of internal constraint system, improve the system of independent directors
(1) to standardize the mechanism of selection of independent directors. To ensure the independence of the independent directors, is the key to the implementation of the independent director system, but also the vitality of the independent director system. The key is to ensure the "independence" of independent directors selection mechanism. We hope that the independent directors can truly safeguard the interests of minority shareholders, it must be constructed by hiring an independent director mechanism of minority shareholders. However, the SFC issued in 2001, listed companies to establish a system of independent directors guidance clearly states that "the board of directors of listed companies, the Board of Supervisors, individually or jointly hold listed companies issued more than 1% of the shares of the shareholders can make an independent director candidate people. "This provision is tantamount to a declaration large shareholders remain in control of the legality of the independent director candidates. Therefore, in our building mechanism by hiring an independent director of minority shareholders is still difficult, but as a transition, appropriate restrictions should be represented by the largest shareholder and executive director of the independent directors of the shareholders the right to nominate.
(2) to regulate the rights and responsibilities of the independent directors. Independent powers and responsibilities to give independent directors will help improve their independence. The guidance provides listed companies in addition to giving independent directors have given the terms of reference of the directors, the Companies Act and other relevant laws and regulations should also be given the right to special competence of independent directors and independent opinions published. To strengthen the sense of responsibility of the independent directors, independent directors should be made clear to exercise special rights and an independent opinion of both rights and obligations, the independent directors must exercise their functions and powers and independent opinion, rather than just "should", and the annual reports of listed companies disclosed in fulfilling the rights and responsibilities of independent directors. In addition, from a legal perspective, the Companies Act and other related laws and regulations need to be modified to clear the rights and responsibilities of the independent directors, the rights and responsibilities of coordination between independent directors and supervision to coordinate the relationship between the independent directors and the board of supervisors, the independent directors in the operation The process according to the law. (3) the establishment of the independent directors of incentives. Independent directors is "economic man", there are incentive problems, need to be clear who is going to evaluate the performance of the independent directors, how to evaluate and how to reward or punish a range of issues. Performance evaluation mechanism of independent directors has not yet been established, which is independent directors have been unable to play the role of a reason. Incentives of independent directors is a self-discipline and moral constraints must be considered "independent director reputation mechanism", once the independent directors in the performance of the listed companies should be independent and objective, the intangibles to protect and enhance their reputation, and expand their future market.
3.2 specification internal control system
(1) improve the internal control system of norms. At present, our internal control norms lack of a molding system. Currency funds with the basic norms of internal accounting control norms "specific norms issued implementation and other specific norms have been put forward, internal accounting controls will form a complete system of norms, but in the operational level , there are still quite a daunting task. Currently the many norms many very principle, in reality, the operability of the relatively poor. Specification absence and failure will affect the validity of the specification.
(2) to strengthen the control of the internal control actors ", the internal controls are implemented. Leave the people's active role in the development of even the best management system and control measures are to no avail. Personnel quality control including: Zhirenshanren; strengthen the staff, especially accounting ethics education personnel and the establishment of technical training in rotation system, improve employee ethics and technical quality; staff assessment and performance evaluation system; establish reward system; establish duties rotation system.
(3) to establish a good communication system, improve effectiveness of internal controls. It includes: confirm that the record of all economic business; keep the recording business, in order to properly classified, accounting reports; the proper monetary value econometric Business; to determine the economic business period, and at a reasonable accounting period recording business transactions; the appropriate prompt economic business financial reporting.
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