Investment Value, Whitewash Screening Of Listed Companies Through The Financial Statements

The main function of financial analysis is to analyze and evaluate acorporation's performance and financial risk .and the financial statementis usually used to fulfill Bond Evaluation and Stock Evaluation in a valueinvestment strategy. However, in recent years, the phenomena of coloringfinancial accounts, offering false information was very severe, whichmisleads the investment action and thus affects the development ofsecurities market badly. The events from YingGuangXia andQiongMingYuan in china to Enron affair and World Communicationaffair in USA are all typical cases. At present there are lots of articlesabout how to analyze fraud information of financial report of listedcompany, however, are all based on the analysis about not investment butfinance. And, these articles are scrappy and have not gone deep into someprimary problems, especially on some key subjects of financial accounts.So just under this consideration, I choose "Finding listed company'internal value though colored financial accounts" as my research subject. The article is divided into four chapters. In Chapter 1, the reasons of glossing over the financial statement areanalyzed, internal and external factors are discussed respectively. The internal factor of this action is the imperfect corporate governessstructure of listed companies in our country, which mainly lies in the lackof ownership and that the Insider control is quite not common, which inturn make the corresponding mechanism of checking and balance loseefficiency. The external causes include: (1) The expressing of finance isnot accurate; (2) The pattern and structure of financial accounts areirrationality; (3) The CPAs' audit is not perfect, and the listed companies'opportunity income is much higher than the cost of being punished forproviding fraud information. Chapter 2 is about the ways of how to gloss over the statements,which are as follows: (1) Utilize rearrangement of assets by assetsreplacement, merger and acquisition outside the company, peels off assetsto the outside; (2) Gloss over the status of profit by the trade betweenaffiliated parties: purchase and sell between affiliate companies,rearrangement of assets, trusteeship management, contracts to run, leasingmanagement, obtaining illegal funds and transfer of liabilities; (3) Utilizeaccounting policies to gloss over the financial statement, which includes:utilize the changes in accounting policies and utilize the Accrual basis andMatching to gloss over the financial statements, and so on; (4) Utilizeimproper accounting methods to gloss over the financial statement. It canbe divided into: improper deal in interest resulted form loans, improperaccounting in stock share, disregard or withdraw desperation, improperaccounting in income and expense confirmation; (5) Utilize improperaccounting estimate to gloss over the financial statement; (6) Utilize theabnormal incomes to gloss over the financial statement. Chapter 3 discusses the eleven usual ways and skills to analyzefinancial accounts of listed company and find the false information in it.Several typical cases are introduced in according to certain skill whichmentioned in this section. The skills usually be utilized to gloss overfinancial statement includes: (1) To identify fraud information in thefinancial statements, which things must be take into account? (2) Somewarning–signs of glossing over financial statement; (3) Detailed skills toidentify the false information in the financial statement. And it can bedivided into: the analysis of some key index; the analysis of asset quality;the analysis of taxation; the analysis of gross profit and net cash flow; theanalysis of subsidiary and internal transaction; the analysis of auditor'opinion, and so on. (4) Assistant skills of identifying the fraud status inthe financial statement, which mainly means the analysis of some keysubjects in the financial accounts. Chapter 4 introduces the methods to modify the glossed overfinancial statement, which includes: (1) Utilize cash flow to identify theperformance and financ...