Financial Reporting Fraud, Four-dimensional Analysis And Governance

Because of the complexity of this phenomenon, in this thesis, I developed a four dimensions analysis model as a comprehensive analysis instrument to deal with statements fraud problem.This four dimensions analysis model including accounting and standard defects, structure of corporate governance, external auditing and government supervision. In accounting standards, there are several choices for managers to manipulate accounting data. In the same time, with the time lag of accounting standards, it may provide a large scope for statements fraud. In the corporate governance, a major problem is the agent cost, although owners have utilized stock options and independent directors to monitor and motivate managers, we still found that aggressive stock options and lacking of independence of directors may damage those systems, so I recommended the optimization of corporate governance structure to overcome those disadvantages. As to the collateral of auditors and managers, we paid more attention to how to enhance the internal control system and independent pricing system. At last, regarding to laws, there are three aspects to discuss: the legal regulation, protection of investors and financial reporting system.The corporate governance structure and government supervision are two important factors in financial statements fraud, others are supplemental factors.