Study On Accounting Information Distortion Of Listed Companies In Chinese Stock Markets

Accounting information distortion is a common phenomenon in capital markets. This thesis analyses the causes of accounting information distortion of listed companies in Chinese stock markets and accordingly proposes the resolution of this problem. This thesis concludes the main conclusions as follows by theoretical and case study methodology:1.This thesis defines the accounting information distortion according to different levels. That is, the distortion results from accounting record that does not abide by the accounting rules, and those from the imperfect accounting rules that could not completely reveal the financial status of businesses.2. Analyzing representative fraud cases in the global markets, this thesis summarizes the fraud methods that frequently used by the listed companies, as well as resolutions to regulate such problems.3.This thesis makes a brief summary of the studies on accounting information distortion of Chinese and international scholars to acquire original thoughts for the resolution of distortion problems in Chinese capital markets.4. The thesis systematically analyses the cause of accounting information distortion of listed companies in Chinese stock markets, including: (i) information asymmetry, the inherent reason of distortion; (ii) unclearly defined property rights, the institutional factors resulted from the insufficient constraint-incentive mechanism; (iii) the imperfection of accounting rules; (iv) weak market and judicial supervision; and (v) the irregularity of auditing industry, resulting in the incomplete fulfillment of responsibilities and roles of independent auditors.5.This thesis initiatively defines the concept of expectation gap between accounting and auditing.6.This thesis proposes strategies to resolve accounting information distortion problems. Such strategies may include: (i) acknowledging the person who should be responsible for accounting information distortion; (ii) reducing information asymmetry; (iii) defining property rights clearly and establishing effective constraint-incentive mechanism; (iv) improving accounting rules and regulations; (v) strengthening market supervision, and regulating the fraud behavior of listed companies in strict ways; and (vi) strengthening the supervisory function of CPA in auditing.