Research On The Strategies Combating Financial Statements Fraud

A financial statement should faithfully represent the financial status and operating results of an enterprise. As an accountant, the author is always hurt and regretful whenever a financial statement cheating case is reported by mass media. The author also regrets that the accountant or auditors have not fulfilled their duty to prevent the managers from doing so. This has given strong impulse on the author to express his opinions, and is his research motives. The author hops that he can express creative views, contributing to the circumvention of financial statement cheating.Firstly, through this reach, the author covers the legal liability for preparing and auditing financial statement contents by way of literature review. Secondly, the definition and classification of cheating are then explored, before analyzing the causes of cheating, its present situations and problems. After doing that, the author has chosen two Taiwanese cases and one American case to analyze corporate backgrounds behind cheating, and to analyze the causes, methods and forms of cheating. And finally, the author classifies and summarizes the causes of financial crisis of listed companies and OTC companies in Taiwan area.At the end of the research, concrete recommendations combating financial statement cheating have been made as the following: Firstly, criminal penalty has to be quick and increased, in order to achieve its punishment effects. Secondly, Taiwan CPAs should learn from China's advanced model, including penalties on CPAs and CPA firms. In addition to civil liability, Taiwanese CPAs have to deposit a portion of their annual income in a bank as security for their liability. Thirdly, the Stock Exchange Corporation is responsible for financial statement cheating due to improper supervision, so the Stock Exchange Corporation is responsible for losses suffered by investors, in addition to administrative penalties. Fourthly, lending bank of the Listed Company should have a representative in the company board of directors to monitor the operation of the company, Fifthly, the government (or the Stock Exchange Corporation) should set up a fund, providing incentives to the general public that is willing to analyze drawbacks of financial statement.