The Correlation Of Earning Quality And Financial Statement Fraud

It has a long history that financial frauds restrain the development of capital markets. Such as the Southern sea case which stopped the Britain economy and the unbelievable breakdown of New York stock market, finance occupational frauds could envelop the capital markets all over the world in the haze of cloud. As in domestic market, the investors suffered in many famous listed companies' financial statements fraud, holding their money in hands. As above, the finance occupational fraud is cancer of the society, not only broking the principia of securities business—fair, just and open, but also impacting the optimization of capital in securities business as to damage the investors'benefits and hold the domestic economy back. So, it is time to prevent and control the finance occupational frauds.Earning quality is a new financial indicator, but it will express more and more important status in the future. Earning quality is a target to measure the deviation between the report earning and the true earning, reflecting the earning's inside quality. According to the definition of earning quality, it is easy for us to say that there is a deep connection between earning quality and finance occupational frauds. It's no doubt that finance occupational frauds will impact the earnings of public companies, so it can be an excellent approach to disclosure the finance occupational frauds in future time. However, there is little research about the relevance between earning quality and frauds both in domestic and overseas. Above all, this article is going to search a new way to prevent and control the finance occupational frauds in the thoughts of earning quality.This study contains 5 parts:First, the paper summarizes the backdrop, purpose, means and the structure of the research, pointing out the deficiency of previous research and the direction of this paper, expounding the contribution and the deficiency of this paper at last.Second, it is theoretical part. It describes the concept of earning quality and finance occupational frauds. According to the concepts, this part gets into the off and turns' connection between quality and finance occupational frauds with theoretical method.Third, it establishes an evaluating model of earning quality. It divides five different characteristic of earning quality, and chooses a few financial indicators to describe each characteristic. Finally, the entirety of these indicators is the evaluating model of earning quality.Fourth, it's the empirical part, the main part of this paper. It chooses 30 fraud public companies as a study sample, which was disclosed by the Securities Regulatory Commission in the year 2001-2009. At the same time, it finds a matched non-fraud public company for each fraud one to establish a control sample, which has the most similar characteristic with the sample company. At last, it calculates the earning quality of the two samples using the model in the third part, verifying the correlation between earning quality and financial statement frauds.Fifth, it attempts to propose the way to resolve financial statement fraud in the thought of earning quality. According to previous empirical test results, it discusses the rational use of earnings quality to identify and control the finance occupational frauds, from the policy supervision department, certified public accountants and investors, three different points of view.This thesis is a substantial and normative research combining together with, and gives priority to the substantial research, verifying the relationship between quality earnings of listed company and financial reporting fraud.This article verified the relevance between quality earnings of listed company and financial reporting fraud, improving the theory of earning quality and the identifying mechanisms for financial reporting fraud. This article also combined earning quality with practical work, making the earning quality of the new financial indicators to a really useful one.