An Empirical Analysis Of The Effect Of Internal Control On The Fraudulent Behavior Of Financial Statement

Financial statement fraud has undoubtedly is an extremely sensitive andimportant problems, it is a serious risk that hinder the healthy development of theeconomy. Financial statement fraud has shaken the trust of investors in the securitiesmarket, and may even make the enterprises are subject to unprecedented economicloss. In China, although the relevant departments of financial statement fraud issuesconcern, and to a certain extent and scope to take corresponding measures, however,the financial statements of fraud incidents or repeated prohibitions. China’s capitalmarket is in a period of comprehensive reform, resulting in financial statement fraudoccurred in a variety of factors, including internal control is one of a variety ofimportant factors. On internal control and financial reporting fraud is directly relatedto internal control how to run to curb financial statements fraud influence and impactof research, a lot of literature is still in the stage of theory and case studies. Therefore,in order to establish the integrity of the internal control system, the better to avoid therisk of financial statement fraud, protect investors’ legitimate rights and interests andeconomic interests, need to discover and explore the internal control and financialstatements fraud directly linked to the need to strengthen internal control is the goalof the reliability of the financial statements.This article first summarizes the domestic and foreign scholars on the financialstatements of fraud and internal control effectiveness point of view, the fraud triangletheory as the theoretical basis of the study, and sets out the internal control systembackground, the two aspects of internal control and financial statements fraud directly linked. Through the analysis of the fraud triangle theory "opportunity" to understandthe internal control factors and prevention of fraud on the financial statements and toillustrate the relationship that exists between the two. The view of the internal controland its evaluation of theoretical and empirical research, through the establishment offive internal control sub-index as a measure of internal control effectiveness standards.The paper selects2010, China’s Shanghai and Shenzhen A-share listed companies assamples, the use of the logistic model study of internal control effectiveness offinancial statement fraud, the empirical analysis. The empirical results show that: thecompany’s governance structure indicators, information disclosure indicators andexternal monitoring indicators were negatively correlated with financial statementfraud, which shows that the internal control of listed companies, the more to curb theoccurrence of financial statement fraud. Listed companies due to loopholes in theinternal control system led to a serious loss of financial statements fraud will giveshareholders and investors, managers inevitable manage risk. Listed companies needto establish a sound corporate governance structure, to promote the efficient use ofresources, detailed planning information disclosure, stringent requirements of theexternal oversight system, its audit report issued by authoritative, to providereasonable assurance of the fairness of the financial statements information in order toeffectively avoid financial statements fraud.The paper is divided into six parts, the first part is an introduction, introduces thebackground of the topic of this article, the significance of the topic, the approach,research ideas, and this innovation; The second part of the literature review, the paperon the financial statements fraud motivation, financial statement fraud identificationand internal control effectiveness literature review and comment, and then putforward the idea; the third part is the theoretical analysis and assumptions, the part ofthe first detailed definition of the meaning of fraud and discuss fraud "opportunity"elements in the triangle theory, and further theoretical analysis of the effectiveness of internal control and make assumptions; The fourth part is the research design andsample selection, this section includes a choice of empirical research sample,determine the research methodology and build a logistic regression model; The fifthpart of the empirical results and analysis, the assumptions on the proposedmulti-descriptive statistical analysis, independent samples T-test and Logisticregression analysis to arrive verify the results, and empirical results of analysis androbustness tests; The sixth part of the conclusions of this study and the relevantproposals made for the subject.