Research On Review Of The Sham Accounting Statement

Through analyzing the sources and objective conditions of the existing of Sham Accounting Statement, the paper illustrates the ultimate motivation and multi-motivation of Sham Accounting Statement, as well as why Sham Accounting Statement can exist widely. As well know, the investors make decisions by the information of Accounting Statement, to assure the legitimacy, truthfulness, reliability of Accounting Statement it must be audited by Certified Public Accountants. There are inevitable connections and essential distinctions between Statement Review and Audit. There are both components of independent audit principles, and they are both used to assure the legitimacy of accounting statement But Statement Review is that CPA, accepting the entrusting, mainly executes inquiring and analyzing program to illustrate whether there are the circumstances that Statement Review offend the enterprise accounting rules and other financing accounting laws and rules. While accounting statement auditing is that CPA, entrusted according to the laws regulating, executes auditing and gives opinions to the statement and other data and economic activities reflected by these data. Statement Review can only provide passive guarantee because it can only use limited audit procedures, but Statement Audit can provide positive guarantee thanks to its requirement of executing legal auditing procedures. An Accounting Statement is a system made up of Balance Sheet, Income Statement and Profit Appropriation Statement, Statement of Cash Flows and each of their appendixes. And these statements reflect a company's financial conditions from different angles, and at the same time, Balance Sheet, Income Statement and Profit Appropriation Statement, and Statement of Cash Flows constitute an organic entirety according to some logical relations. Accrual-basis, Balance Sheet reflects a company's financial conditions from inventory amount angle. Income Statement and Profit Appropriation Statement reflect a company's financial conditions from current amount angle on Accrual-basis. And Statement of Cash Flows reflects factors affecting the ability of a company repay its maturity debts and its amount on cash-basis, that is to say, Statement of Cash Flows changes profit on Accrual-basis into actual profit on cash-basis (cash or items equal to cash). Thus there are inevitable logical relations between these three concepts. Using relations between them, through reviewing the Accounting Statement of Dongfang Electron Corp.2000, the paper testifies the key effects that Review can tell the sham Accounting Statement.