On Prevention Of Accounting Risk In Chinese Colleges

Accounting is the activities for a certain goal with the application of scientific management theory and methods to process the accounting objects, create accounting information, and participate in decision-making and management. Owing the fiduciary obligation to management authorities, the accountant controls his behavior by the business processes:identifying, recording, measuring, and reporting. Under the effective rules, the accounting practices conform to the goals of the fiduciary obligation to achieve the effect of behavior controlling the entrusting party requires. However, accounting is also activities of risk management because of people's limited rationality, interested motives as well as the uncertainty of accounting transactions, accounting rules, accounting procedures, and accounting behaviors. The current falsified accounts reflect the accounting risk, which have resulted in social crisis of confidence in the accounting profession.College accounting is a tool for value reflection and procedural control of economic activities in colleges. And accounting risk is objectively existent in college accounting. Accounting results have economic value, but the accounting risk may bring visible or invisible loss to both sides in finances, reputation or other aspects. Risk prevention and accounting control correspond with each other naturally. Based on that, this paper tries to analyze the deep-rooted causes for college accounting risks, and explore the construction of system for preventing the college accounting risk through applying conception of risk management in college accounting practice, in the hope that it can arrive at a beneficial conclusion. The first part of this paper is the theoretical examination which introduces the fundamental viewpoints about the Principal Agent Theory, System Theory, Information Theory and Control Theory. It analyses the existing operating environment of accounting in colleges, and points out the accounting risk is characterized by objectivity, universality, potentiality and controllability by analyzing its connotation. Besides, the analysis based on the ideas in System Theory, Control Theory, and Information Theory elicits a conclusion that risk controlling can be achieved by transmission and processing of accounting information. The second part explores the causes of the risk of college accounting, and reveals that the risk results from these internal and external incentives such as the ineffective operation of the commissioned agency, the inefficiency of accounting controlling, the failure of professional self-discipline, and the deficiency of affixing responsibilities to accountants. The third part is case analysis through which it further demonstrates the existence of risk in college accounting, and explains the serious consequences in case of risks'occurrence. In addition, it points out that the prevention of risk in college accounting activities still has problems with cognition and management. Finally, based on the former three parts, the fourth part puts forward concrete strategical conception.