Fraud And Preventive Measures Of Yihua Life Research On The Consequences Of Financial Law Under The Background Of The New Securities

China’s securities market has grown rapidly over the last 30 years,and by the end of2021,the total market value of securities in China’s A-share market was 84.86 trillion yuan,with 5067 listed companies and over 210 million investors.The phenomenon of financial fraud in listed companies has grown in tandem with the development of China’s securities market.Financial fraud by publicly traded companies is a challenge to securities regulations,resulting in a misallocation of resources in the securities market and misleading investors’ value judgment,which is the "persistent disease" of China’s securities market.Controlling financial fraud in listed companies is critical for the long-term development of the securities market.The People’s Republic of China’s newly revised Securities Law went into effect on March 1,2020,to strengthen supervision and prevent financial fraud in listed companies.The Securities Regulatory Commission cracked down on fraudulent acts of listed companies after the new Securities Law went into effect,and Yihua Life,as one of the first companies to be punished by applying the new Securities Law and fined over 30 million yuan,the incident has a wide impact and warning effect.As a result,this paper uses Yihua Life as the research object and examines the financial fraud incident and its consequences in light of the new Securities Law.This paper examines the impact of China’s new Securities Law on financial fraud as well as the causes and consequences of financial fraud in Yihua Life using the literature research method,the case analysis method,and the event research method.The following are the main conclusions: First,financial fraud is a relatively complicated process.Yihua Life’s financial fraud was caused not only by the company’s poor management and blind expansion in the face of fierce industry competition,the strong motive of shell preservation,and the prominent risk of equity pledging,but also by the company’s shareholding imbalance,the failure of internal control,the ineffective performance of auditors,the low cost of fraud,and the management’s fluke mentality.Second,under the new Securities Law,YIHUA Life’s financial deception harmed both the company and its stakeholders.The market reacted negatively to Yihua Life’s financial fraud,and the stock price fell further,resulting in its delisting;the administrative,civil,and criminal costs of the company’s fraud increased;the company’s financial situation deteriorated dramatically;and the risk of bankruptcy increased significantly;the auditor’s reputation plummeted,auditing credibility was lost,and it would face huge administrative penalties and civil joint and several liability;small and medium-sized investors misled by false financial information suffered heavy losses.Therefore,on the basis of the existing law,we need to further improve the governance measures: deepen the main business,improve the disclosure of information on equity pledges,focus on the reasonable structure of equity,improve the internal governance mechanism,improve the ability of auditors to perform their duties,give play to the supervision function of multiple subjects,improve the moral quality and professional ability of the company’s employees,strengthen the supervision of foreign business,increase government supervision,etc.It is expected to provide some new ideas for the prevention of financial fraud and bring some inspiration to the governance of other listed companies.