The Research On The Detection Of Fraudulent Financial Reporting Risk Based On The Audit Evidence Theory

The high-speed economy development of China leads the boom of stock market and the problem of the financial fraud at the same time. The financial report which should be the main approach for investors to evaluate the financial situation of a company becomes a tool to mislead them making wrong decisions. The misrepresentation causes the chaos of capital markets, decreases the optimum efficiency of capital distribution,ruins the fundamental benefits of investors. To limit the financial fraud, the most important thing is distinguishing the very behavior of financial fraud. However, former researches have two following problems: the deficiency of the correlated guide theory of the financial fraud; the incomplete result based on the prior information. Therefore, this paper did a deep research about the distinguish of the financial fraud risk based the two above problems. This paper tried to use the auditing evidence theory as the fundamental theory to distinguish of the financial report fraud risk and use bayes estimations to build the posterior distinguish model of the financial fraud, to optimize the capital distribution, increase the distinguish possibility of the financial fraud, recover the confidence of the investors.The data used in the paper is the public companies that are be reported by the SSE and SZSE from 2005 to 2014 because of their financial fraud. Under the auditing evidence model guidance, this paper explore to the financial fraud distinguish model. All the samples have several characteristics: the number of companies who had financial fraud activities is increasing; the frequency of the financial fraud is normally high; the industries who had financial fraud problems are concentrated. Those features pave the way for the further research of the conclusion analysis. This paper is still following the Toba’s confirming evidence and supporting evidence to separate the variables into four categories: logical-contradiction confirming evidence; pressure-factor supporting evidence; opportunity-factor supporting evidence; excuse-factor supporting evidence. After processing the description analysis and the correlation analysis, we discovered that, because the financial fraud frequently appeared, common index financial distinguish does not work well and other well known distinguish methods do not work either. Therefore, after deleting the invalid variables, this paper used the SPSS software to build a standard discrimination function and used Bayesian Discrimination Model to verify the whole samples, receiving 74.9% of the accuracy. Based on the research of the models, we separately tested the distinguish efficiency of those four categories. We affirmed the function of the each category, and explained the variables which have small significance.This paper expounded the research’s background, mean, approach and frame in the introduction and recalled the current situation of the domestic and overseas financial fraud research and current situation of the domestic and overseas distinguish researches in the literature review. During arranging the literature, we raised some questions about what we were focusing on. Thereafter, this paper defined the relationship among the fraud, financial fraud, and the financial report fraud, and then used the definition, the financial report distinguish theory, and the auditing evidence theory to build an analysis hypothesis. Finally, this paper did the conclusion analysis and used the description statistic analysis, correlation analysis, and the affirm analysis to find the conclusion.In the first place, the main contribution of this paper is arranging the logic framework of the evidence theory, first-time tried to use the auditing evidence theory into the financial report fraud research, and published the four categories variables based on the fraud theory. In the second place, this paper used the Bayes distinguish model to recognize the financial report fraud, which is a good way to test the efficiency of the evidence variables in the financial report fraud distinguish and provide direction to develop the fraud research.