Research On Financial Fraud Identification Mechanism Incorporating ESG Information

In recent years,the frequent occurrence of financial fraud in Chinese listed companies not only affects the standard operation of Chinese securities market,but also shows that the traditional financial fraud identification system which focuses on the enterprise’s operating conditions and financial indicators is difficult to deal with the increasingly complex and hidden financial fraud.However,the ESG evaluation system based on environmental,social responsibility and corporate governance information can reflect the social responsibility,sustainable management ability and overall credit quality of enterprises in a more comprehensive and objective way.Its indicators can reflect the quality of corporate management information from the side,and the data is not easy to whitewash,which can effectively make up for the shortcomings of the traditional financial evaluation system.Therefore,integrating ESG information into the traditional financial fraud identification method is conducive to improving the accuracy of identifying financial fraud,and has a very important significance for strengthening market supervision and protecting small and medium investors.This paper collected domestic and foreign ESG and financial fraud related literature,then introduced the financial fraud identification and ESG system related theoretical viewpoints.On this basis,this paper first selects ST Kangmei,which has the largest amount of money involved in recent years,typical cheating methods and relatively more ESG information available,as the case study object,to analyze the necessity and feasibility of integrating ESG information into traditional financial fraud identification.Then,this paper establishes a financial fraud identification mechanism integrating ESG information,and uses it to comprehensively judge the abnormal characteristics of ST Kangmei,and unearth signs of financial fraud in ST Kangmei,and finally analyzes its financial fraud identification effect.According to the research of this paper,the conclusion can be drawn: firstly,by integrating ESG information into the traditional financial fraud identification method,the financial fraud of ST Kangmei can be effectively identified;Secondly,ESG information can play a strong complementary role in financial fraud identification.Integrating ESG information into traditional financial identification methods can effectively reduce the difficulty and improve the accuracy of financial fraud identification,and help to avoid investment risks.Finally,based on the perspective of ESG,this paper gives suggestions to the regulatory authorities,enterprises and investors respectively.It is hoped that through this case study,it can provide certain reference and demonstration for investors and regulatory authorities to identify and prevent financial fraud of listed company.It also hopes to attract various interested parties’ attention to enterprise ESG information and promote the development of ESG system in our country.