Financing Statement Fraud: The Identification Of Risk And Construction Of Model

As a languague of business, financial statements’ realisity and belief have a greateffect on business. But in the golable market of recent years, the fraudent financialreports coming out one by one has breaken the heart of users of financial reports. Asall we have known, on one side the expouring rate of fraudent financial reports isalways high, on the other side the situation of the identification of fraudent financialreports is so bad and certification auditors haven’t proved us some believing financialreports that many businessmen had lost much money because of these fraudentfinancial reports. The behavior of frauding the financial reports has brought lots ofhurt to others. Firstly, it will have bad effects on users of financial reports and makethem lose much money. Because they will make decisions on the financial reports, thefraudent and wrong messages that show on the financial reports will make a lead tothe wrong way for the users of financial reports. Secondly, they will make the relevantnational regulators can’t find and restrain the phenomenon of the listed company’sfinancial fraud risk. As a result, it will lead to the investors’ money flowing fromhealthy companies to unhealthy companies that disclosed false report, and lead to thechaos and disorder of securities market. So how to identify and evaluate the financialreports’ fraud risk becomes the focus question of what the global financial reportusers concerned of.This paper uses the combined method of normative and empirical researchaccounting method, and uses the integrated method of induction, comparison andanalysis to grasp the fraud factors identification based on different theory, as well asbased on the administrative punishment of the CSRC published in various types oflisting Corporation financial reporting’s fraud behavior. Then it makes the fraud riskidentification, evaluation indicators of financial fraud the selection, assessment modelpossible. The model is applied to the enterprise in the stock market, and the traditionalfinancial fraud risk assessment was conducted by comparing the system of evaluationresults, to evaluate the conclusion of the model.The paper relates to the financial reporting fraud cases of administrative penaltyin2008to2012China’s listing Corporation by the CSRC in published. It hasclassified the deed of fraud, identified the fraud behavior and risk, evaluatedindicators of financial report. Based on the appropriate choice of the fraud sample,paired samples and prediction samples, it constructs the fraud risk evaluation model,linear probability model and logistic regression model. Studying on constructing themodel results, it shows that there is the related index can be used to identify thefinancial reporting fraud risk, such as accounts receivable index, control selfassessment index, the audit report quality index. Compared with logistic regressionmodel, the error rate of the linear regression model is high, but the accuracy ofprediction is low. And the logistic regression model has a rate as high as90%of the discriminative ability and prediction ability. So in the practical application, it can bechosen with other auxiliary method of comprehensive evaluation to measure andavoid the risk.The significance of this research lies in: on one hand, it summarizes thecategories of fraud fraud in the SFC announced listing Corporation, introducing therisk evaluation index, improve the recognition results fraud risks; on the other hand,itevaluates properly into fraud in financial reporting fraud on the risk identificationindex, clearly reveal financial fraud risk as the goal of model, and establishes theoverall evaluation system of financial fraud risk. From the perspective of CPAs, theidentification of risk and evaluation system of listing Corporation financial reportingfraud can increase the possibility of CPAs’ identification skills of financial reportingfraud, and the establishment of financial reporting fraud risk identification system thatintroduced into the area of auditing can help CPAs undertake reasonable fraudauditing responsibility, improve the effect of audit fraud, avoid auditing failure andaudit risk rationally, and reduce the risk of litigation which caused by frequentfinancial fraud risk. From the perspective of users of financial reports, the financialreporting fraud risk identification and the model establishment of fraud risk willenhance the ability to identify fraud risk, and to a large extent safeguard their rightsand interests. From the perspective of regulators, the financial reporting fraud riskidentification and the model establishment of fraud risk will strengthen thesupervision on indirect listing Corporation. It will be helpful with early detection andprevention the fraud reporting risk. And it will be able to control the processing oflisting Corporation financial report fraud fast, stably and accuratly.