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On the listed company's accounting information distortion causes and governance

Author: LiJun From: www.yourpaper.net Posted: 2009-12-29 13:10:36 Read:
[Abstract] With the reform and put the depth of capital markets accounting information is increasingly important, but China's securities market is still in its infancy, there are many problems, one of the most prominent problem is that the listed companies' information disclosure distortion, serious damage to the interests of investors disrupted capital market order, is not conducive to national macroeconomic regulation and control, how to solve this problem worthy of serious study.
[keywords] Public Company Accounting information distortion causes and treatment

Listed companies illegal fraud cause analysis
Why do some of the Public Company Accounting information willful fraud? I believe that the fundamental reason is the huge temptation; low cost illegal. The specific reasons for false accounting information for their own interests in general the following aspects.

1. Eligibility to issue stock to be able to market
According to the Companies Act and other relevant laws and regulations, companies must recent three consecutive years of profit, and operating results to come through the approval of the SFC, the listing eligibility. Listed companies will bring many benefits, some companies would like to be listed, but its operating results to meet this requirement in order to be able to obtain a listing of the qualifications, only through the whitewash of accounting statements, to make the illusion. This packaging to provide false financial statements listed practice not uncommon in China's capital market.
2 companies to raise more funds
Listed companies can be profitable related to corporate finance problems, the one hand, if the listed company is the enterprise at a loss in order to obtain a bank loan, they had inflated profits, making up false accounting data; On the other hand, if the amount of stock issued certain the issue price of the shares directly determine how much of the funds raised by listed companies, listed companies increase revenue through inflated profits, if the increase in earnings per share, the investor is bullish on the stock, and continue to buy, which would raise the issue of the stock price.
3 listed companies in order to avoid the stock is delisted
In accordance with the provisions of the Companies Act and other relevant laws and regulations, listed companies are losses for three consecutive years, the SFC will suspend trading of its stock and limited eliminate losses, if not eliminate losses in a limited period of time, its shares will be delisted from trading on an exchange will be terminated. Stock delisting will bring huge losses to the company was forced to, any of the listed companies do not want to get this result, even the loss of listed companies in order to make the stock can continue to issue they fabricated false accounting reports.
4. Listed company to be investigated for achievements
Currently, the assessment of business performance indicators profit targets. A variety of indicators, such as the rate of return on investment, the profit margin, profit plan completion of these indicators and profit, the Board of Directors through these indicators the results of operations of the operators to inspect. Listed companies are often at a loss, it will affect the operators during the performance evaluation, and further affect the positions of the operators and bonuses. Seen in this light, is closely related to the operating profit of the business performance of listed companies. Therefore, the listing of the company in order to enhance the post or get big bonuses changed accounting statements, inflated profits things have occurred.
5 China's accounting laws and regulations are not perfect punishment to
Due to a late start, and the overall quality of the accounting staff is not high, and China's accounting regulations and company law, there are certain problems. Imperfect legal cause some skirted the law, for the some counterfeiters problem, even if the legal responsibility of the accounting officer is investigated, only minor fine and punishment to exacerbated Cheating accounting personnel. Second, to improve the quality of accounting information measures analysis
1. Establish a sound internal oversight mechanisms
The Accounting Oversight inadequate, a very important factor is the internal oversight problems, the very over companies do not recognize the importance of internal oversight mechanisms. They only investigated the scale, efficiency, and lower the cost of doing business, while ignoring the importance of establishing an effective internal control. Internal oversight capacity is weakening, resulting in the case of to fabricate false accounting information have occurred. In order to protect the security, integrity of corporate assets, to ensure that the accounting information is true, is essential to establish and improve internal oversight mechanisms. Establish a sound internal oversight mechanisms is to establish a safe, effective and workable system of internal control. The internal control system is a very important role in modern enterprise management is to ensure that the accounting information is true and complete, and strict implementation of this system, will be able to detect possible errors, fraud against accounting information, to avoid possible losses.
Continue to strengthen external supervision
External oversight, including the supervision of the government, financial, tax, financial, securities regulatory agencies, as well as a certified public accountant of the enterprise.
First, to strengthen the government intervention, to prevent false accounting information of government intervention is very important, but the supervisory role of the government departments did not play out, the rights of the various government departments overlap, cross management directly affect the result of the quality of accounting information.
Second, play the role of fiscal, taxation, financial sector, preventing fraud occurred.
Again, strengthening the reorganization of the team of certified public accountants. Certified Public Accountant is to maintain the economic order, maintain financial reporting objective and fair economic police, should become the most important force to improve the quality of accounting information, but there are many problems in the audit process was, for a variety of reasons, CPAs often can not effectively fulfill its oversight functions, and can not be independently published objective, impartial audit opinion.
Improve the legal system, strict law enforcement
First of all, it is necessary to improve the accounting laws and regulations. In order to improve the quality of accounting information dial Lu, China's relevant departments of accounting laws and regulations, such as "accounting", "Accounting Standards for Enterprises", the "Securities Act" Accounting basic norms ". These laws and regulations to improve the quality of accounting information played a certain role, but these regulations and also there is the concept behind the system, empty the contents of the defect, there are problems to be further improved. These rules and regulations should be improved on the original basis according to the needs of economic development, re-revised, with the international practice, to make it more perfect.
Second, our law enforcement is weak, even if the accounting personnel of acts of fraud were found, and its punishment is negligible. The law enforcement agencies must adhere to the "legal basis, the law must be strict, violators are prosecuted" principle. Various parties, providing false accounting information in violation of accounting laws and regulations must be strictly punish accounting fraud once the fraud is necessary to pay a high price. For those who do not comply with industry guidelines, as well as non-compliance with the accounting professional ethics of personal exposure and kept strictly punish them, To those without their expulsion from related industries. When the violation cost is greater than the gains brought about by the violation, the violation will naturally decrease. Only by increasing law enforcement of accounting regulations to implement the requirements of the implementation of accounting, in order to effectively play the role of the accounting regulations in the to solve accounting information distortion problems, reduce the occurrence of accounting information Cheating fundamentally improve the quality of accounting information.

Third, to improve the credibility of accounting information, draconian laws with international standards
Listed company to the whole society is through the social fund raising projects each limited funds smartest, most capable, most management awareness business people. Trust accounting reports may extend the internationalization of China's capital market, and the time dragged the longer. To improve the credibility of accounting information report, is the premise of safeguarding the interests of small investors. The ideal model of corporate governance, that is, under the the draconian laws requirements drawn up by the Government, the professional managers to do my best for shareholders and is responsible for a good company in the stock market, bad company delisting.
Put the in-depth reform, capital market accounting information is increasingly important, China's securities market is still in its infancy, there are many problems, one of the most prominent problem is the Corporate Disclosure distortion, serious damage to the interests of investors, disrupting the capital market order, is not conducive to national macroeconomic regulation and control, how to solve this problem worthy of serious study.

References:
[1] Cai Hongbin Analysis of Accounting Information Distortion [J]. Technology Plaza 2006.9.
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