A Earnings Management Case Study Based On Anhui Guotong Hi-Tech Pipes Industry Co.,Ltd

Reform and opening to now,our country has made a leap of development in the economic construction.However,the establishment of the accounting system has not realized the simultaneous development.There are still many shortcomings and loopholes.Many companies often make use of the imperfect accounting,whitewashing their accounting statements, seeking their own interests, harming the interests of shareholders,and even endangering the sustainable development of the national economy.There is a special system on China’s securities market,namely ST system.It is an abbreviation for Special Treatment.The ST system is for those companies which in the financial situation or any other abnormal situation.If the loss continues in two consecutive years,in front of the company will plus the name "ST",meaning "special treatment",with this flag to distinguish between listed companies special treatment and normal business,to remind investors investing such companies will has a certain risk.And they need caution.Due to a variety of motives,such as market protecting motivation,finance motivation,ST companies want to get rid of the signs of special treatment as soon as possible.But taking off their hats is not so easy,and they have to meet the requirements of the securities market of the job.Due to various reasons,many companies can not quickly increase their revenues or reduce operating costs. So they come to whitewash their report by excessive earnings managements manipulate profits,to achieve the purpose of taking off the hat.This behavior leads to the distortion of financial statements and misleads invests,disturbs the securities market,ultimately affects the long-term development in the country’s economy.This article gave a detailed analysis of how ST companies make their profit through earnings management behavior by disclose STguotong twice taking off its hat.ST companies didn’t fundamentally improve operating conditions in order to achive profit,but to use accounting manipulation imperfect to institute profit.In 2012, the listing rules of taking off the cap of ST eased a restriction which is "after deducting non-recurring gains and losses attributable to the listed company’s net profit is positive."Many ST companies take off their hats because of this condition,and their manipulations are very similar.Many ST companies were selected by the non-recurring gains and losses to whitewash report,adjusted profit legally but unreasonably.The purpose of writing this article,on the one hand through a variety of means of earnings management ST stateline carried out,the final process of taking off hat,revealing how ST companies made a profit instead of suffering a loss.On the other hand is to reveal the listing rules in regulations imperfecr,causing consideration of relevant departments.At the same time the author put forward the views from the revision of accounting standards,the market regulation and internal control.