Astudy On The Financial Restatements Based On The Perspective Of Internal Control

The financial statements reflect and record the company’s financial position.Financial and accounting information it carries not only record operating profit scientific and effective information, the provision of the information management of the company, but also help investors to make investment decisions. Nowadays, the country’s economic capital markets have become increasingly important,delivery financial reports to provide financial information to investors is particularly important.Financialrestatement resulted in poor quality of financial information. Analysis the reasons for financial restatements event multiple in recent years, from the company perspective, partly because the managers subjective motivations of earnings management, the other is incomplete corporate governance;from a market perspective, is due to inadequate supervision regulators on information disclosure, such as the lack of workable laws punishing is weak, and so on.Financial restatement phenomenon reduces the quality of information disclosure in capital markets.This will not only affect investor decisions,damage the interests of investors, but also interfere with the normal operation of the capital market.Financial restatements and financial reporting quality are closely related, and it is management’s responsibility to ensure that the financial statements present fairly reflected the company’s financial position and operating conditions.Management has the responsibility to design, implementation and maintenance of internal controls necessary to enable the financial statements of material misstatement due to fraud or error cause does not exist..Financial statements is the result of internal control. Whether the financial statements are true and reliable depends on the internal control’s presence, strength, implementation effective. The company has a sound and effective internal controls, financial reporting in large part to ensure the fair and reliable. If a company has a sound and effective internal controls, it’s financial reports are likely to fair and reliable.For the construction of the system of financial restatements, China’s financial restatement related systems established late, now there are still many immature place. Researches on financial statement in China mostly focus on theories in term of the motivation, corporate governance, market reaction and so on.However,researches on internal control over financial restatements are rarely seen. Therefore, there is a big space in study the case of financial restatements analysis.In this article, normative study and case analysis will be both adopted. The author select the financial restatement case of Shenzhen Hirisun Technology Incorporated. The author analysis and evaluate the environment through its financial restatement occurs, the content and impact of financial restatements and internal control of HIRISUN, financial restatements before and after comparison of internal control. Analyze the relationship between internal control and financial restatements.Based on the above ideas, this article consists of six parts, each parts’contentas follows:Chapter one, introduction.Introduces the research background, purpose and significance, ideas and methods of this article.Chapter two, literature review. The author sum up theliterature about financial restatementdomesticandforeign.including financialrest atement company characteristics, the motivation of financial restatements, economic sonsequences of financial restatements.Each research area are summarized by direction and subdivision, and finally summarized and reviewed the status of the existing research literature.Chapter three, the theoretical basis of company financial restatements. Including financial restatements institutional background of Chinese listed companies, the U.S. financial restatement related systems and enlightenment, the status of China’s listed companies’ financial restatement, the theoretical basis of financial restatements:Principal-agent Theory, Information Asymmetry Theory and Stakeholder Theory. From the internal control deficiencies is the cause of financial restatements, the five elements of internal control perspective on the impact of financial restatements perspective of the relationship between the two financial restatements and internal control.Chapter four, overview of HIRISUN’s case. Background on the financial restatement cases overview, first introduced HIRISUN’s profile, the difference between HIRISUN and other listed companies’ listing history, then introduce HIRISUN’s corporate governance characteristics, primarily equity structure and organizational structure, finally describes the changes and the general situation of the company’s financial restatement event audit institutions, the sponsor institution.Chapter five, the analysis of HIRISUN’s financial restatements. Elaborated on the content of HIRISUN’s financial restatement and substantive analysis of the impact of the financial restatement of financial statements of HIRISUN, company’s share price, the company’s normal business activities. Focus from internal control perspective on the company’s financial restatement:compare the before and after parties on the company’s financial restatement evaluation of internal control changes from the internal environment, risk assessment, control activities, information and communication, internal supervision of the five point of view of the company’s internal control defects, explains HIRISUN’s internal control deficiencies resulted in financial restatements mechanism occurs.Chapter six, conclusions and implications. Summed up the shortcomings of the financial restatement system, put forward the corresponding policy recommendations and point out the deficiencies that the article may exist.The main contribution of this article is:first, from the perspective of internal controls to analyze financial restatements, enriching the study of financial restatements related aspects; secondly, the case shall be binding on the financial analysis of the impact of restatement of internal control, provides policy recommendations in order to avoid financial restatements occurrence.Of course, there may be some disadvantages in this article. First, in the case study, due to the SFC investigation HIRISUN’s financial restatement is not yet completed, this analysis can only be based on existing information disclosure, may not be complete and comprehensive. Second, due to the current financial restatement and no specialized research databases and uniform standard,,the financial restatement announcements article gathered may have some omissions and deviations from the truth.