Distortion Of Accounting Information

The article is to study on the falsehood of accounting informationinduced by rule constitutors and executors who have incentive not tofollow the procedure of rule-making and implementing when institutionand procedure are irrational. According to Wu Liansheng's theory incategories of falsehood of accounting information, the article is focusedon player's actions and strategies under irrational institution andprocedure which lead to the institutional and intended falsehood. So thebehavioral falsehood and falsehood led by humane-beings' limitedrationality are excluded. The article will use techniques and conclusion in game theory toanalyze the actions and strategies under irrational institution andprocedure which lead to the institutional and intended falsehood. Therelevant conclusions in game theory are used in analyzing the institutionalfalsehood, and as for intended falsehood, the analysis begins withcorporate governance and reality to establish players in the game, thendevelops three models after abstracting players' behavior and sequence ofactions. The first model is dynamic one with incomplete informationbased on financing incentive and involved by small shareholders, majorshareholders and management. The second one is static game model withincomplete information involved by management and Governmentregulatory departments. And the third one is dynamic model withincomplete information involved by management and accounting firm.The binding conditions of each optimal solution are founded after eachmodel, as well as correspondent conclusions. At the end of the article,ways to deal with the falsehood are given according to the formerconclusions and reality in China.