Discussion of corporate anti-fraud protection system of financial reporting

[Abstract] history of the Development in the audit, the company's financial reporting fraud audit profession has always been troubled by a major social issue. Treadway Commis-sion (the nation's anti-fraud financial reporting committee) of the COSO report comprehensive treatment of the anti-fraud of corporate financial reporting the protection system, its current presence in China capital market accounting information, audit risk increased, investors, decision-making such as the failure to study and solve the problem have a good reference.

History of the Development in the audit, the company's financial reporting fraud audit profession has always been troubled by a major social issue .20 the 90 years since the company's financial reporting fraud is more rampant. According to the 1995 American Association of Certified Fraud Examiners (Association of Certified Fraud Examiners, ACFE) report estimates, financial reporting fraud losses every year about the U.S. economy up to 4000 billion U.S. dollars. In addition, according to United Insurance Company CPA estimates that each year the U.S. financial reporting fraud at a rate of 15% In 1998, Bi Ma Wei international accounting firm (Peat Mar wick) of fraud for the third time extensive survey sample of 20 industries from 5,000 companies and organizations were surveyed, including to senior managers, operations managers, financial managers , portfolio managers, internal auditors and general staff and so on. survey conducted in 1998, the average fraud amount per dance for the 11 • 6 million, more than millions of dollars in fraud, either. fraud (especially the financial report fraud) is also more serious in China. China since economic reform, along with the deepening of capital markets Development, economic prosperity, but there are some corrupt elements in the process of using the problems in the transition, do everything possible to seek personal gain, hindering economic healthy Development. the emergence of a large number of fraudulent financial reporting is a concentrated reflection of the corruption, which makes the governance of financial reporting fraud has become the pressing issue. Additionally, with the improvement of content management technology, network technology and electronic commerce expanded opportunities for financial reporting fraud is still increasing, and more subtle means. Therefore, it is necessary to learn from the successful experience of foreign countries, give full play to our auditors in the prevention of fraud of the role of financial reporting.

A, COSO fraud in Research on financial reporting of financial reporting fraud is of great harm, not only greatly increased the audit risk, but also misled investors and creditors to enable them false financial information based on making wrong judgments and decisions, and lead to Government regulators can not detect, prevent and resolve business groups and financial institutions, financial risk, which will lead to distortion of accounting information society as a whole, the harm would be catastrophic. audit profession has long recognized the problem, disadvantages of trying to troubleshoot by mortgage fraud to solve this problem. To this end, in 1985, the United States of Certified Public Accountants (AICPA), American Accounting Association (AAA), Institute of Internal Auditors (IAA), the Financial Managers Association (FEA) and National Association of Accountants (NAA) together form the Treadway Commission (National Anti-Fraud Financial Reporting Council). The committee will define Fraudulent financial reporting described as "an intentional or reckless conduct, whether it is false or omission, the The result is misleading result in significant financial reporting ". Treadway Commission in its landmark <<1987 report>> in comprehensive treatment of the corporate anti-fraud protection system of financial reporting. The report recommended that the following four lines of defense to prevent fraud Financial report: high-level management philosophy, business and management in internal control, internal audit and external independent audit.

By the Treadway Commission's sponsoring organizations (The Commit-tee of Sponsoring Organization, COSO) In "<1987 report>> Based on the results of follow-up study was published in <<Corrupt Financial Report: Analysis of U.S. companies (1987-1997)> >. The report of the U.S. Securities and Exchange Commission (SEC) financial report submitted by a large number of fraud cases were analyzed. The following brief report on the content: COSO is committed to the fundamental purpose of this study is to prevent fraud and seeks to address the following issues: Who is carrying out fraud? fraud nature, type and technical means what? The study examined by the SEC's <"Accounting and auditing rules and regulations implemented Gazette>> (SEC, Accounting and Au-diting Enforcement Releases, AAERs) listed The 11-year period 1987-1997 financial report cases of fraud. randomly selected sample of fraud in financial reports of 200 companies, involving nearly 300 cases of fraud. The report of the company and management characteristics of a distinction between fraud in the a way for auditors to provide early warning signals.

1, the maker of financial reporting fraud. Often occurs fraud in the previous year's total assets are generally less than 1 million, or manufacturing companies of fraud is usually relatively small companies. Many companies (in fact up to 78%) not in New York or American Stock Exchange. In the fraud before the annual average net income of only $ 1,750,000. many companies are at a loss prior to the implementation of fraud or non-profit status. can be said that the financial difficulties these companies engaged in corrupt conduct The main motivation. The key management personnel and are often involved. in 72% of cases, AAERs referred to the CEO (CEO), 43% of cases involving Chief Financial Officer (CFO), 25% of the fraud company does not have an audit committee. fraud in the company have an audit committee, the majority of the members had no accounting qualifications or accounting or financial position did not work experience. Internal Audit Committee of the company, about once a year fraud. visible Audit Committee report on the prevention of financial fraud or have some positive effect. in the manufacture of fraud reporting company, the board members are usually involved, or "shadow" (Gray) leaders (they are closely linked with the corporate management of external ). The members generally hold shares in many companies, roughly 33% of the shares owned company, which only accounted for 17% of the CEO personally, but the lack of long-term board member leadership experience, overall quality is not high. reposted elsewhere in the Research Papers Download http://www.hi138.com 2, Fraudulent financial reporting and the types of technology. In general, relative to the amount of fraud involved in the case of small and medium companies is quite large. often deliberately misstated financial statements, or theft average assets of 41 million, while average total assets of these companies was only $ 1,600,000. The fraud is usually not a transaction is completed, the majority of at least two accounting periods span, often relate to quarterly and annual accounting statements. fraud than average 23,7 months. typical fraud technology, including over-the financial statements of income and assets. most of the early recognition of revenue through fraud or fictitious income to achieve. a lot of revenue fraud only in the end of the transaction treatment. also has about half of fraud is overvalued assets (such as overvalued inventory, fixed assets, intangible assets and other assets of value and underestimate the bad debts) or to non-existent asset register recorded a false sales. as cover up fraud, companies often fabricated inventory records, shipping records and invoices. In some cases, the company recorded sales of the goods is only transferred to other companies. In some cases, the company sold in the form of shipping, if sales have occurs, then the auditors to conceal the shipment to the customer's situation is not .2, not safety performance in terms of sales revenue recognition under the circumstances. usually in the order received but not yet for sale prior to delivery to the customer dealing with .3, conditional sales. transactions involving unresolved questions or need consultation, and may even eliminate the obligation to customers to take custody of the goods, the transaction is still recorded as income .4, inappropriate sales division. to increase sales revenue, No final closing of the accounting, sales recorded in the next period of .5, the improper use of percentage of completion method. by exaggerating the completion of projects under construction to overestimate the proportion of income .6, trustee sales. the affiliate revenue as the company sales revenue to inflate earnings .7, not authorized shipment. shipment of goods are missing or not limited other necessary goods, rather than selling at full price refund or a discount record to increase revenue.

Second, our understanding of audit risk revelation in the case of imperfect capital markets, corporate financial reporting has become some of the primary means of providing false information. China's enterprises (especially listed companies) a variety of ways of financial reporting fraud , such as through asset restructuring and related transactions, losses are losses, asset assessment, early recognition of revenue, etc., make a big fuss in the financial report, a significant impediment to resource allocation function of capital market to play. Zhongnong letter closure, colored large loss events Zhuzhou , Hainan Development Bank was taken over, and the Guangdong International Trust and Investment Corporation was closed, etc., are exposed from one side of the seriousness of the financial reporting fraud. fraud financial reporting are mostly for the company's senior management, some of them people for a variety of financial motivation, "manipulation", created an extremely bad social impact, but also our country is facing unprecedented challenges auditors.

In 1991, Fujian Province of China took place within the auditing profession first lawsuits against auditors, the company has gradually taken place in the case of wilderness, the Great Wall Electrical Company Case, Joan source case, the red case, Yinguangxia case, the case of Dongfang Electronics , so that the public audit profession to prevent the fraud of the financial reporting credibility and role of the doubt. It should be said, the auditors in preventing financial reporting fraud or has a unique inherent advantages. may consider following the example of the United States Treadway Commission, by the audit profession, the Ministry of Finance, the Joint Commission and the business community set up a special committee to study the independent auditor in the prevention of fraudulent financial reporting role and specific measures. fraud by theoretical Research results from abroad.

Situation of our country, and actively carry out fraud empirical study of financial reporting. Meanwhile, you can collect a typical audit cases, quantitative analysis, summarized some of the laws, understand the corrupt nature of the preparation of financial reporting incentives, motives, conditions and methods to improve audit who expose fraud against the audit of financial reporting and risks, to minimize or eliminate the hazards Fraudulent Financial Reporting.

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