Whitewash Means Of Company Financial Statements And Audit Strategy

As a carrier that transmits information of enterprise's operational statement to outside, when being analyze the financial report, not only should people integrate that invested resource advisably to increase their wealth, but also should understand how to differentiate business signal efficiently. That mean people should know whether the information are true or not, and by this way, they could look through the truth of company's operation and avoid the risks of investment to protect their vital interests. As a result, the authenticity and fairness that financial statement present on and the truth the people find out from those numerous business data are critical to promote the effect in utilizing the financial report. Further more, the authenticity and fairness have great insignificance in raise people's creditworthiness and make national economy develop healthy.However, the importance of that two points:authenticity and fairness have not yet been paid attention seriously by people. In recent years, the means of prettifying financial report and the fraud amount have astonished most of the people, whatever that have happened to the listed companies or employees. For auditing fields, auditing financial report efficiently become the invariable aim, nevertheless, how to obtain the goal always perplex many scholars. At the same time, many governments all over the world have been aware of the urgency to reorganize and supervise accounting and auditing areas and companies, and they think that it is high time to formulate measures to control the company fraud. Therefore, the writer starts with investigation of financial cosmetic means, intends to find out effective auditing measures, and hopes to provide some references for following research on company fraud cases.The writer adapts the logical positive approach and normative approach to accomplish the academic dissertation. First of all, she sets international classical company fraud theories as breakthrough point, which are patting for some related discussion latter. Then the author introduces some motives to cosmetic financial reports according to practical situation in China. After that, she starts with new view of point to classify all enterprises'business as four items:general purchase, general selling, currency collection and payment, and formation of accounting data. Through the way, it is much easier for writer to research the financial report fraud tools and audit strategy. It seems to the author that this way may be a innovation in analyzing the auditing problems.In logical positive analysis part, the writer designs a mode with 11 exogenous variables: X1 to X11, and a endogenous variable:Y to forecast firm's profit of trade. In addition, she chooses 32 listed companies that had accounting skullduggery as samples from Guo Tai An financial database from 2005 to 2008. Follow that, by stepwise regression analysis, the author eliminates some exogenous variables, which have low degree of fitting and little significance. Finally, through the White Test and Autocorrelation Test, the writer gets the three exogenous variables that have intimate relationship between they and Y, i.e. X5(Overhead Expense), X7(Income form Investments), X8(Net Cash Flow from Operation).In the modeling verification stage, the author chooses another five firms as samples, which was revealed in 2009 that these firms had prettified the financial report seriously in 2008 in order to verify the model's predictive ability. By a series of verification, the author find out that there are four firms'error of Y locate the scale setted in advance, and suggest that the model have ideal predictive ability, although these figures have slight degree of difference compared with practical situation. Of course, the model is just a theory equation, which cannot be regarded as a fraud proof independently. Hence, auditors must adapt other various auditing strategies and a variety of auditing procedures to obtain skullduggery proves.Finally, after understanding the financial cosmetic means and verifying by the profit forecast model, the author explores some important auditing strategies in order to find out efficient measures to curb the company fraud.In the light of the statements above, the writer suppose that as a competent auditor, he/she must possesses high professional quantity, such as professional skepticism and willing to ask themselves "why" time and time again. Furthermore, a excellent auditor, with acute observation and curiosity, should think about casual connection among the complicated phenomenon and have brave to overcome different kinds of difficulties. Overall, in order to protect people's behalf and guarantee to make our society develop healthily, revealing fateful financial fraud scandals is an important duty for auditor.