A Study On Accounting Fraud Regulation Systems Of Listed Companies In China

The problem of accounting fraud has been a hot issue and been paid attention by the stock markets and researchers for a relatively long time. In recent ten years, there are more and more Chinese listed companies’accounting fraud cases have been investigated and punished, which caused a serious malignant consequences, such as the investors suffered severe damages, disturbed the normal operation of the market, influenced the effective allocation of resources, reduce the investors" faith to the market. Most countries treat it as a important regulate mission that prevent and control accounting fraud. But because the special characteristics of accounting fraud and the influence of the supervision system, the market environment and so on, it is always a big problem for China and other countries. In recent days, the researches about accounting fraud problem of China most concentrate on built the accounting fraud identification models, or try to find the features of fraud companies. Few researches are about the accounting fraud regulation systems. The thesis takes that the accounting fraud of Chinese listed companies has its special characteristics differ form other break law actions, such as do great harms to the society, concealed behavior, Involving a wide range of the public and hard to control. It is necessary that set up a series of integrated accounting fraud regulation system from the angle of better the system construction and implementation systematically to enforce the supervise the accounting fraud, restrain the fraud behaviors effectively.The thesis takes both the normative research and empirical research methods to analysis the regulation systems and the accounting fraud characteristics of China of nowadays, and put in perspective a whole structure and specific contents of Chinese Accounting Fraud Regulation System. It begins with the studying of accounting fraud characteristics of listed companies, analysis the causes of accounting fraud and behavior features of China from the aspects of theories and practices. Then, it studies the defects of present systems and the improve directions. Based on those studies, the thesis proposes the idea of structure the Chinese accounting fraud regulation system. The thesis bases on the condition and the market characteristics of China. Combine the analysis of regulations and empirical research, analysis the three main sections of the regulation system systematically. They are the early warning regulation system that implements before the fraud accounting information has been disclosed, the identification regulation system that implements after the fraud accounting information has been disclosed and the punishment regulation system that implements after the accounting fraud deeds have been confirmed. The thesis has designed specific system structures that direct against the detailed regulation goals. It is been fully discussed about the basic elements of the systems, the structures of the system, the operation patterns, the problems during the running process and the solve methods, proposes more detailed thoughts of system construction and Implementing measures.The final conclusions of the thesis can be summarized as follow:A. The fundamental motivation of accounting fraud of Chinese listed companies is pursuer the excess market profits. The fading of stiff supervision provides implement opportunities for accounting fraud, the faults of corporate governance creates conditions for accounting fraud. Those factors act together that induce the occur of accounting fraud, During1993-2010, the accounting fraud cases that have been investigated and punished reflect that the characteristics of Chinese accounting frauds are high fraud amount, long fraud time and the severe losses of the society.B. The empirical analysis about the characteristics of Chinese accounting frauds shows that the main means of accounting fraud are falsely increase profits and assets. The industry distribution characteristic of fraud companies is mainly concentrate on manufacturing industry. The region distribution is imbalance compared with the listed companies volumes of local areas. The asset sizes of the fraud companies relatively small, and the income indexes, such as business income, earnings per share, operating profit ratio, return on assets, are obviously low. The indexes of corporate governance show that the first major shareholders holding particularly more shares than other major shareholders, the size of the board of director is relatively big and the numbers of the independent directors and supervisors are small.C. The problems of the listed companies accounting fraud regulation systems a of China are the design of the regulation systems is irrational, Regulatory authority allocation is unsuitable, execute ability is weak, reflection to the cases is late, lacking the initiative, Incentive and constraint mechanism are insufficient. The Chinese accounting fraud regulation system structured by the thesis includes three son-systems, the early warning regulation system, the identification regulation system and the punishment regulation system. The mother-system and the son-systems all have their own system structures and eight key elements. Those systems have interconnections and interactions among them and within them, and all of them realize the supervision on listed companies’ accounting fraud actions.D. The early warning accounting fraud regulation system is aimed at preventing the accounting fraud actions. It is implemented by system construction, internal supervision, audit supervision and government supervision to stop the disclosure of fraud accounting information. It is important to reduce the system luring of accounting fraud by perfecting the basic systems, and reform stock issue systems, improving and perfect the delist system, enforcing the implement system of accounting principles. The listed companies’accounting fraud self-supervision system should be realized by perfect the corporate governance systems, including the perfect of the equity balance system, standard the board of director’s operation, built the internal supervision system and the manager governance. The China Securities Regulatory Commission (CSRC) and the Department of Finance should set up their own accounting fraud risk classification system, supervising the actions of listed companies at real time. Chinese public accountants should defend their independence, professional ethic and spirit, to perform their entrusted auditing obligation and realize the supervision duty on accounting fraud.E. The identification accounting fraud regulation system is aimed at distinguish the fraud accounting reports that have been disclosed. With the help of accounting fraud identification models, the coordination power of government regulation, self-regulation and the social regulation can seek the accounting fraud actions more efficiently and effectively. The CSRC is leading force of accounting fraud government regulation. It realizes the effectively accounting fraud investigation by perfect the regulatory authority allocation and improve the regulation methods. The government department of China such as the department of Finance and the tax department and so on, also should to perform their own supervision duties authorized by the acts and mutual communicate and coordinate with the CSRC. The self-discipline organizations and the intermediary organization such as the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the Chinese Institute of Certified Public Accountants (CICPA) and so on should realize their duties of supervising their members by perfect the self-discipline regulations. It is necessary to form social supervision environment by enforce the investor education, reasonably guide the news media’s supervision, encourage the public to join F. The punishment accounting fraud regulation system is aimed at punish the fraud parties, make up the damaged parties and warning the public. Its effective enforcement is ensured by force. The analysis on the accounting fraud punishment shows that in recent days, both the administrative penalty, self-discipline penalty and the criminal penalty have the problems of punishment systems are not clear, the punishment rights of the subject are confined severely, the standards of the punishment are too low, the punishment means are too simple and punishment implements are not strict enough. The administrative penalty systems should be perfect and coordinate the conflict of the different acts and regulations, enforcing the punishment. It is especially important to change the condition that there is a great disparity between the fine and the accounting amount or the accounting income of the accounting actors. The self-punishments should enrich the punish means, actively exercise the punishment right. What should be do include reforming the civil lawsuit system, adding group action and litigation support system (amicus curiae), canceling the reposed procedure, encouraging the victim of the accounting fraud to exercise their right to appeal, perfecting the Civil compensation system and setting up the punitive damage standards. Enforce the criminal punishment on the accounting fraud crime by re-classifying the crime type of accounting fraud crime or change the punishment standards.