Research On Identification And Management Of Financial Reporting Fraud By Chinese Listed Companies

Enron's fraud event in 2001 once again made financial reporting fraud become the focus of global attention. The frequent exposure of financial reporting fraud seriously shakes investor confidence and hinders the healthy development of economy. After a brief overview of the development history of China's capital market, it is filled with scandals of financial reporting fraud. Nowadays, in the shadow of the world financial crisis, various walks of life are facing unprecedented difficulties, hence how to effectively identify and deal with financial reporting fraud, protect investors'benefits, promote economy to develop healthily and sustainably, has now become the key problem needing to be urgently solved by theoretical circle and practical circle. Thus, the author selects the identification and governance of financial reporting fraud of Chinese listed companies as study objects, hoping to be beneficial to the public recognition and social governance.The dissertation applies the normal study supplemented by case analysis, and based on GONE Theory and Principal-Agent Theory, the paper will search for reasons of financial reporting fraud of listed companies from four aspects: cultural and moral factors, motivation factor and opportunity factor, and combines with financial reporting fraud cases from home and abroad to relatively vividly and visually analyze typical means of corporate financial reporting fraud. Perils full of smell of gunsmoke are filled in capital market, and it's apparently very important that how to identify financial reporting fraud actions and surmount fraud traps. Then, the dissertation consequently will systematically elaborate how to identify financial reporting fraud actions of listed companies from management sign, industry environment sign, operational abnormality sign, financial abnormality sign and other abnormality signs. Respecting management sign, due to the strategy of catching the ringleader first in order to capture all his bandit follows, the paper considers it the most important sign in identifying fraud. Finally, based on study on the identification of the four elements, typical means and typical signs of financial reporting fraud, the paper will put forward some effective measures to cope with financial reporting fraud. Tackling financial reporting fraud is a rather complicated and tough systematic event. On the foundation of honesty and moral construction, consummating internal and external check-and-balance system is the fundamental outlet to tackle financial fraud. Since financial reporting fraud is generally dominated by management, against which effective internal and external check-and-balance system should be formed, thus the paper considers that we should urgently foster and develop professional manager market in China, strengthen stimulation and restraint over management, and meanwhile improve independent audit balance system. With regard to how to improve independent audit system, the author suggests that China could attempt to found a financial report insurance system to solve the problem that currently CPAs in China are not independent, so as to effectively restrict financial reporting fraud.The study of this dissertation will enrich financial reporting fraud theories, provide a modicum of reference of how to identify and tackle fraud, repay investors the truths, make financial reporting fraud running low, and promote sustainable and healthy development of Chinese economy.