External Prevention Of Accounting Fraud And Governance Issues

The prevention and management of accounting fraud issue has been a global difficult problem which troubles the theoretical realm and the practical realm, even in the United States that the economic system and the legal system is known as one of the best market economy system~1.I believe that a good internal control system is an important factor of the prevention and management of accounting fraud, but the perfect external monitoring system is indispensable key steps, and the external monitoring system can prevent the internal control only from becoming a mere formality. External monitoring mainly includes the independent audit and government monitoring. The independent audit is the prevention and government monitoring is the management and the assurance. When the probability that the CPA discovers accounting fraud surpasses 2/3, the audit can play a role in deterring accounting fraud, of course the premise is that the CPA should maintain his rightful independence. It's obviously that auditor's ability and willingness plays a key role to prevent and manage accounting fraud. If the government enhances the dynamics of monitoring and punishment to force CPA to undertake responsibility of accounting fraud, it can play a role in deterring accounting fraud and achieve the goal of managing accounting fraud. The article proposes that we should construct the perfect external monitoring system to form a good communication mechanism between social and enterprise from the angle of improving the ability of CPA discovering accounting fraud audit and government monitoring.This article is divided into 6 parts. First, the introduction points out that accounting fraud issue is a global difficult problem which troubles the theoretical realm and the practical realm. Especially the management fraud is the direct reason that leads to accountant fraud. Therefore, the research on the prevention and management of accounting fraud has the extremely important significance in the theory and practical. In the second part, the literature review briefly introduces about the overseas accounting fraud research literature, including standard research and real diagnosis research. The content involves the agent, the recognition, the prevention and the management about accounting fraud and so on .There is no doubt that these research results provide certain rationale and research technique for researching accounting fraud in listed companies in our country. The third part introduces the implication and motive of accounting fraud. Accountant fraud is the illegal activity that violates accounting standards or the "Accounting Law" for the purpose of gaining improper or the illegal benefit and causes critical misleading financial report or critical property loss. Accounting fraud can not be equated with accounting irregularity and earnings management. This part has also analyzed the status of Chinese accounting fraud. The fourth part is this article's key point. It has analyzed the external prevention and management of accounting fraud strategies. In addition to good internal control mechanisms and management structures, the control of human is a more important aspects factor of the prevention and management of accounting fraud, which may cause well-functioning internal control expiration. This also is why we must strengthen of external monitoring and management. Specifically it's necessary to handle the relation among the management, CPA and the government properly.The fifth part and the sixth part continues the fourth part to propose the external strategy of the prevention and management of accounting fraud from the independent audit and the government exterior monitoring angle and draw the conclusion. The prevention and management of accounting fraud is a comprehensive, systematic project. It requires not only the perfection of the internal control structure, including well-designed internal control system, board of directors member structure, internal audit committee, a series of organizational structure and so on, but also the surveillance and strengthening of the exterior prevention and management mechanisms, including forcing CPA to undertake the responsibility of the accounting fraud by independent audit as well as government supervision and punishment. However, what needs to point out is that accounting fraud is a global difficult problem. Depending on internal and external management mechanism is not able to solve fundamentally. We must pay attention to create and maintain the good faith and speak moral enterprise culture to prevent and manage the accounting fraud from the roots.