A Case Study Of X Company's Financial Fraud

Mergers and acquisitions of enterprises can activate stocks,effective integration of resources,generating synergistic effects,improving the efficiency of resource utilization,promoting the development of economy in the direction of high quality and efficiency,further promoting supply-side reform.Listed companies restructure through upstream and downstream mergers and acquisitions in the industrial chain,absorbing high-quality corporate resources,improving financial and operational conditions,find new profit growth points,promoting transformation and upgrading,optimizing resource allocation,and then promote the healthy and stable development of the national economy.If a listed company acquires a company with "toxic assets",it not only brings the risk of financial fraud of listed companies,influencing the compliance development of listed companies,it will also bring investment losses to investors due to false statements.However,driven by huge economic interests,the target company takes risks to implement financial fraud in order to achieve the goal of high valuation in the process of merger and acquisition.Once it is acquired by listed companies,the shareholders of the target company will realize high valuation premium and withdraw,leaving a large number of potential risks in the listed companies.In recent years,with the in full swing development of mergers and acquisitions,financial fraud cases of mergers and acquisitions of listed companies are not uncommon because of the "over-packaging" labeled companies loaded into listed companies.In order to reduce the infringement of investors' legitimate rights and interests by the financial fraud of the target company and destroy the normal order of the capital market,it is of great theoretical and practical significance to study how to identify and prevent the financial fraud of the target company.In this case,the merger and acquisition of X company by Guangdong China Sunshine Media is a typical case of transformation and upgrading of traditional media advertising industry to new LED outdoor media industry.After merger and reorganization,the profit and development space of Guangdong China Sunshine Media will be enhanced.However,due to the financial fraud of X company,Guangdong China Sunshine Media injected "toxic assets",which not only failed to promote the transformation and upgrading of Guangdong China Sunshine Media 's business,but also caused Guangdong China Sunshine Media to suffer heavy losses,affected the development of Guangdong China Sunshine Media,dragged down the process of Guangdong China Sunshine Media 's industrial transformation,and caused significant losses to the interests of investors.Firstly,this paper briefly introduces the background and process of Guangdong China Sunshine Media 's acquisition of X company,and analyses the typical financial fraud methods of X company's fictitious business,such as false increase of main business income,fictitious bank repayment,false increase of asset cost,concealment of major guarantee,etc.Secondly,according to the GONE theory of financial fraud,this paper focuses on the analysis of the causes of financial fraud in X company from four dimensions: greed,opportunity,need and exposure.Firstly,the actual controllers of X company lack basic integrity,attempt to exit at a premium through systematic financial fraud,and paralyze the acquirers and intermediaries to a certain extent through continuous commitment.Second,X company's ownership structure is unreasonable,and the internal control mechanism is virtual,which enables the actual controller to override the control and instructs the internal multi-department personnel to cooperate with its fraud.Thirdly,Guangdong China Sunshine Media 's decision-making mechanism has major defects,such as the absence of independent directors' functions,the absence of internal audit,and excessive reliance on intermediaries.Fourthly,the intermediaries have not maintained their due independence in the due diligence process,and have not been able to maintain reasonable career skepticism and proper career prudence in the face of inadequate professional competence in emerging industries.Fifthly,X company's financial fraud has been conspired by many internal and external parties,with a high degree of cooperation,and it is difficult to find out,while bribery and bribery during the period further reduces the probability of discovery.At the same time,It sums up the characteristics of financial fraud of X companies such as system fraud,the use of fraudulent characteristics of emerging industries,and the illegal intertwining of various illegal acts.It analyzes the severe punishment caused by the financial fraud caused by X company,the listed company suffers multiple losses,and the serious consequences of the loss of the interests of investors.Finally,it proposes to improve the corporate governance structure of the state-owned enterprise structure and the decision-making mechanism of the board of directors,strengthen the supervision function of the company's internal audit control department,revise relevant laws and regulations,improve the fraud reporting mechanism,improve the collaborative disciplinary mechanism,and strengthen the professional classification of business.Improve and improve the intermediaries' practice quality control system and other series of recommendations..The contribution of this article lies in the specific background of Guangdong Media's merger and acquisition of X Company,Research on Financial Fraud of Subject Company.Through analyzing the motives of X Company's financial fraud,summing up the characteristics of X Company's financial fraud,and putting forward relevant suggestions in a targeted way to curb the corporate fraud motive of merger and acquisition reorganization.It has certain reference value to reduce the chance of fraud and reduce or even eliminate the occurrence of financial fraud on the subject of merger and acquisition.At the same time,how to improve the level of due diligence through scientific decision-making in the process of merger and acquisition reorganization,promptly discover the financial fraud behavior of the company that is the subject of merger and acquisition,and reduce the consequences of financial fraud.And how to make the intermediary fulfill the "gatekeeper" duty in the process of due diligence of merger and acquisition reorganization has some reference significance.Ultimately,it is conducive to the protection of the legitimate rights and interests of the majority of small and medium-sized investors and to the stable and healthy development of the capital market.Due to the limitations of the author's own theoretical knowledge and practical experience,the comprehensiveness and feasibility of the proposed countermeasures have yet to be tested.