The Research On The Relationship Between The Effectiveness Of Internal Control, Nature Of Property Rights And Financial Fraud

Since2008, as the impact of the global economy and Europe’s debt crisis deepens,the major economies, including China, is facing the challenge of the economicdownturn and many listed companies are facing bad economic environment.In thismacro backdrop, many enterprises gained the short-term interests through financialfraud and other fraudulent behaviors to cover up the fact of bad performance inmarket. In the long run, the development of its economy will be seriously affectedindeed. Based on this situation, national regulators and listed companies have givenmore attention to financial fraud behaviors. Scholars are also conducted a lot ofrelevant research on the behaviors of the financial fraud. After through a lot ofspecification and empirical research, the relationship between the effectiveness ofinternal control and financial fraud is more significant. At the same time it points outthat companies should strengthen and improve enterprise internal control system toreduce and prevent the occurrence of financial fraud.In combination with the subject of this study, whether a company’s propertyrights have an impact on the company’s financial fraud? This article attempts throughthe fraud of listed company with property rights of state-owned and non-state-ownedto examine the relationship between them. In addition, this art icle also attemptsto use the company’s property rights as a moderator variable to explore therelationships between the effective internal control and financial fraud.Based on the domestic and foreign relevant study on internal controleffectiveness and financial fraud, coupled with the domestic related research, these determine the direction of the research in this paper. Combined with the domesticscholar’s research in this paper, we regard property rights as a moderator variable tostudy the relationships between effectiveness of internal control and financial fraud.Through the selection of relevant variables data for2009, we build the model toempirically study the relations between the effectiveness of internal control, propertyrights and financial fraud, which verifies the hypothesis, and we also conduct therobustness test of the model. Finally, according to the results of the empirical test, thispaper puts forward the conclusion as follows:(1) the enterprise with strong internal control effectiveness is more likely toengage in financial fraud.(2) the state-owned listed companies financial fraud is less likely compared tonon-state-owned listed companies.(3) In the private listed enterprises, the relationship between internal controleffectiveness and financial fraud is more significantly negative.In view of the above three conclusions, the paper puts forward severalsuggestions:(1) Enterprises should continuously strengthen the construction of internalcontrol mechanism to reduce the possibility of financial fraud.(2) It is necessary to create better macroeconomic conditions for privateenterprises and private enterprise should constantly strengthen the management ofinternal control.(3) Government should better promote fair treatment for state-owned enterprisesand private enterprises.