Analysis On The External Supervision Of Financial Fraud In Chinese Listed Companies

Financial fraud refers to the window dressing or undisclosure real information of financial statement which will misleading decision-making of information users in order to gains illegal earnings by the management of listed companies. The information which is disclosured in the capital market will affect the operation level of capital market. The information of the listed companies' financial statement will greatly affect the decisions which are made by the information users, investors in deciding wheather to invest on the company or not by analysising the information of the financial reports. However, in the past decades, the financial fraud phenonmenon of listed companies has happened frequently. Those companies who have window dressed the financial reports affected the decision which would be made by the investors and have gained earnings illegally. Those activities not only make the investors suffered a loss, blight the society, but also endanger economic operation and inflict great damage to the resource allocation in the capital market. It also will blight the capital market principal of "just", "expedient" and "publicity". According to the status, the problem of how to governance the financial fraud in chinese listed companies effectively is an important research of the academic circles.In the last ten years, financial fraud phenomenon of Chinese listed company occur frequently from the start of Guangxia. Not only because of its internal moral integrity system flaw and corporate governance mechanism loopholes but also because there is a lack of a set of effective, perfect external supervision and restraint mechanism in present Chinese capital market. In Chinese listed company, there exists problems such as ineffectiveness of security and cheating behavior supervision, Therefore, in order to protect the the interests of securities investors and users of financial statements, it is urgent to establish and perfect relevant laws and regulations and improve the corresponding supervision mechanism.The multiple large financial fraud are not only exists in the imperfect market in China but also in the more developed capital market in western countries such as America, such as the immense effects of Enron Case. According to the financial fraud great harmfulness, Western accounting did a lot of further research including the content on external supervision which has a certain significance in China. We should combine the actual specific conditions in China and analysis the strategies and measures for China. This paper just forwards supervised measures response to the financial fraud of listed companies from external angel with the standard research methods and case analysing. It tries to analyse the specific measures which could prevent the financial. fraud. The paper falls into six parts, the following are the main points:The first part is introduction, it mainly introduce the research bachground and research significant, and it reviews the literature, summaries both the overseas and domestic research results.The second part is the theory summary of financial fraud, first it analyses the concept and characteristics of financial fraud, then lists harms of it just as great damage to the market and blight the accounting industry.The third part mainly analyses the current status of financial fraud in chinese listed companies. It analyses the current status of financial fraud by combining the the punishment situation of listed companies which maked by CSRC, such as diversified approach. At the end of this part, it analyses an specific case.The forth part analyses the defects of exterior supervises. It analyses the crucial reason of financial fraud from angel of exterior supervision. First, laws and regulations are deficient. Second, audit market failure. Third, accounting supervision out of control. Forth, inefficient supervision of certified public accountants.The fifth part approach the experience suitable for china according to the foreign advanced experience.The sixth part put measures of improving the supervision environment just from the following parts:perfecting laws and regulations; perfecting operation mechanism of independent audit market; strengthening the accounting supervision mechanism; strengthening audit supervision of certified public accountants.The seventh part is conclusions.This paper gives advices and suggestions on how to perfect the market operation system. In this paper, it finds that law and regulations are imperfect, audit market mechanism failure, ineffective accounting supervision and certified public accountants supervision. Then it put corresponding measures of external supervision.