A Survey On Financial Fraud Issue Of Listed Corporation In China

With the development of economy, accounting is becoming increasingly important. However, in today’s society, financial fraud has become a worldwide problem. From the international perspective, financial fraud of five companies like Enron, WorldCom, Qwest, Tyco, and Global crossing in America has led to a capital market value loss of about$460billion. China’s listed companies, although the absolute amount of financial fraud is less than the United States, in the extent of the despicable means of fraud, some companies have even far more than American companies. The cases of listed companies to be disclosed of false accounting information happen again and again, typically such as:profit packaging before listed like Hongguang Industry, Daqing Lianyi, MACAT, exaggerating profits after IPO like Zhengzhou Baiwen, Lam shares, and the company’s assets is nearly hollowed by the strong stockholders like Monkey King shares, nine hundred and ninety nine medicine, as well as the preparation of false accounting statements to achieve the pinnacle like Qiong Minyuan, silver metal and so on. Recently,"the first national green industry stocks" green earth was penalized by CSRC owing to the failure of internal controls in2011. In2012, known as the "rice deep processing of the first share", Wanfu Biotechnology was discovered financial fraud becoming the first GEM fraud among entrepreneurs, has brought huge economic losses to the majority of investors. From the perspective of the accounting firms, accounting information quality inspection report Twelfth announcement which released by he Ministry of Finance in November2006, among the examination of60accounting firms, found out that some accounting firms in particular small and medium firms owing a low level of internal quality control. There are some situations that the audit process not in place or even deliberately false audit reports issued by the situation. Accounting and auditing fraud would inevitably make accounting information users lose their trust to the accounting information disclosure from listed companies.Listed company, in order to obtain economic benefits from strong shareholders and management, utilizes various means of financial fraud, which not only destroys the order of the capital market, but also making medium and small investors suffer economic losses and lose confidence in the capital markets. This illegal activities have been severely hit by the relevant regulatory authorities like CSRC and so on. The emerging of Financial fraud cases has also attracted enterprises and academic circle’s attention. In this paper, the author has made deeply analysis on the financial fraud means, methods and motives of the Wanfu Biotechnology. Besides, it gives the correspond recommendations and response measures, in order to offer a little bit help for the growing financial fraud phenomenon among listed companies.