A Case Study On Financial Fraud Of Zhangzidao Company Based On Fraud Triangle Theory

China’s securities market is in a period of vigorous development,the market’s resource allocation function,for China’s economic growth has added a lasting power,however,as an emerging market,in recent years,financial fraud incidents have also occurred frequently.From the original Yinguangxia scam,to the later Zixin pharmaceutical,Green Land,Wanfushengke fraud events,and the recent Kangmei pharmaceutical,Kangdexin events,we can see that there are still a lot of illegal behavior in China’s securities market,the need to arouse the vigilance of the entire securities market.As of July 14,2020,domestic accounting firms have issued a total of 3,810 audit reports on China’s listed companies,including 171non-unqualified audit reports,accounting for 4.49% of the total.From 2014 to 2018,the percentages were 1.01%,0.77%,0.99%,1.71% and 0.57% respectively,indicating that violations of laws and regulations in China’s securities market did not decrease.There is even a growing trend.Therefore,it is very necessary to control the chaos of securities market,safeguard the legitimate rights and interests of investors,and create a fair and reasonable market environment.In 2016,Zhangzidao Company inflated its profit by 131 million yuan and reduced its profit by 279 million yuan in 2017.Due to its long duration and huge amount of money involved in the case,it has attracted wide attention from the society.This article first introduces the related theories of financial fraud,including financial fraud motivation theory,the definition of financial fraud,then the roebuck island fraud case review,analysis of the fraud means,including unreasonable provision for impairment loss on inventory,operating cost,non-business expenses-when the need to improve the profit statements,such as fraud subject deliberately reduce for inventory impairment loss,provision of operating cost,non-business expenses;When it is necessary to reduce the profit on the statement,the subject of fraud will deliberately increase the provision for inventory impairment,operating costs and non-operating expenses.Then,under the guidance of the fraud triangle theory,this paper studies the causes of the fraud and analyzes Zhangzidao Company from three dimensions:pressure,opportunity and excuse.The pressure includes profit pressure and debt repayment pressure.Opportunities include difficult monitoring of production process and unreasonable governance structure;Excuses include a lack of legal awareness and moral awareness.Finally,put forward the corresponding suggestions,mainly including relieving the company fraud pressure,reducing the company fraud opportunity,eliminate the company fraud excuse three aspects.To alleviate the fraud pressure of the company includes reducing the blind expansion and improving the profit model;To reduce the chance of corporate fraud,it includes optimizing the ownership structure of the company,strengthening the internal control of the company,giving full play to the role of the third party intermediary,and strengthening the legal supervision and institutional supervision of the company.Eliminating fraud excuses includes cultivating integrity awareness,improving professional quality and cultivating legal awareness.This paper hopes to analyze the causes of financial fraud in listed companies and put forward suggestions for improvement,so as to provide better investment environment for investors.