Study Of The Relationship Of State-controlled Distortion Of Accounting Information

The accounting information distortion, which will exist universally in China in a long period of time, is mainly illegal and it differs greatly from typical accounting fraud cases in foreign countries. The characteristics that China's accounting information distortion shows are closely related to the state-owned-stock property rights system of listed companies. The author believes that state-owned-stock is the major cause of accounting information distortion of enterprises in China.According to modern enterprise theories, a company's residual claim and residual rights of control should match as much as possible; otherwise, the residual rights of control will become "cheap voting rights". Among the listed firms in China, stock-holders only constitute a virtual concept which lacks a personalized body while the officials of state-run assets committee, who exercise the functions of stock-holders, own core control rights over enterprises but do not share firm residues nor undertake any risks. Therefore, it is impossible for the officials of state-run assets committee to pursue profits and avoid risks as much as private capital does. As a substitute parameter companies produce, accounting information is the main data investors need to learn about financial and operating state of companies. Investors should be the main demanders of the accounting information of listed firms. However, the lack of state-holders of the listed companies in China leads to the lack of major demanders who need accounting information most. At the same time, state-owned-stock also derives other series of problems. For example, it makes the role of accounting information insignificant in safeguarding the operator's legitimate rights and interests; it weakens the medium and small investor's supervision on the listed companies while the prevalence of speculation reduces the effects of financial accounting report of listed companies; as the biggestcreditor of listed companies, state-owned banks also lack motive for real accounting information of listed firms.State-owned-stock results in a system by which government appoints operators of enterprises. This system is not a market behavior. In particular, the facts that the officials of state-run assets committee have core control rights but do not share residual claim, that choosing operators is not based on their marketing ability and that evaluating and replacing operator is not based on their achievements leads to operators' uncertainty about their term in service, which in return easily produce short-term behavior. Once operators take control of enterprises, lack of supervision by stockholders will lead to a situation where "insiders prevail". Administrative authorities have sufficient conditions and capabilities of manipulating profits because the supervision of accountants over executive managers is invalid. State-held-stock also results in indistinction between the functions of the government and those of enterprises. Furthermore, lack of state stockholders causes that of the financial accounting statement audit commissioners. However, the fact that corporate management authority hires auditing institutions forms a circumstance where commissioners are exactly those who are the audited. The last resort which secure the accounting information loses its effects.The change that state-owned stocks withdraw from the holding status of the listed company of competitiveness trade and private capital owners takes the role of big shareholders of the listed companies helps to realize the symmetry of residual claim and residual rights of control of enterprises, helps to solve problems that there lack owners of listed companies and that insiders take control and help to perfect corporate governance structure; from the perspective of accounting, the change helps to create the demand of real accounting information, helps, in some sense, to weaken big stockholders' ability to manipulate profits and helps the market of auditing service develop in a sound way. In the last part of this thesis, the author put forward so...