Positive Research On The Financial Statement Fraud Of Listed Companies In China

Financial statement fraud has attracted the attention of investors, CPAsand monitors. With the frequent occurrence of this kind of behavior, we haveto find out its irregular features and its causes, as these are the importanttheory foundations to prevent and find it. In this paper, we collected the datafrom 55 A shares companies (1999-2004) in China which had been forfeitedby SEC because of accounting irregularities, studied the irregular featuresfirstly, and then analyzed the "pressure" and "opportunity" factors by somepositive measures.First, the paper discusses some common features from the analysis ofirregular behaviors, irregular characters, irregular instruments and irregularmotivations of these companies. We found the irregular companies alwaysrealize some certain objectives by disguising the important issues,exaggerating assets and revenues or underestimating liabilities and expenses.After analyzing the irregular features, we studied the causes of financialstatement frauds. Using uni-variable analysis and multi-variable logisticregression, we found that the pressure is mainly form avoiding "ST" and "PT",and the opportunities consist of unsuitability of share concentration, thenumbers of directorate meetings and shares owned by the directorate members,and the directorates' monitoring function. Besides these, some problems ofgovernment management and related policies should also attracted ourattention. For example, how to monitor the disclosure of listed company'sinternal control, how to improve the effectiveness of independence directorsand supervisors.With the analysis of irregular features and causes, the CPAs and monitorscan concentrate on the signs of financial statement fraud, which may helpthem prevent and find it more effectively.