Detection And Auditing Methods Of Financial Fraud In Post Financial Crisis Periods

Financial Crisis is also called "Financial Tsunami". Just like tsunami attack, after the Financial Crisis, the economic world is totally different. European and American economies has been heavily destroyed. Currencies depreciate, stock market fall, companies bankrupt, mass unemployment... All these losses are gonna take years to make up. The financial crisis occurred in2008caused serious consequences. Many companies suffered from tight fund-chain, overstocked products, massive receivables, limited financing channels.The so-called post-crisis period, is referred to a relatively smooth period after the crisis. But keep in mind, the inherent crisis can never be eliminate. Thus the world economic is still unstable. The crisis may probably come back or get worse. In this period steady and unrest coexist. While in this paper, the post financial crisis is particularly referred to the period since the second quarter of2009after the2008subprime crisis. Although the unemployment rate is still high, the confidence is reviving, the indicators are rising, the outputs are increasing and the world economic is becoming better.Corporate responses are widely divergent during the special era of the post financial crisis. Some work hard to keep communication with old customers, some devotes to exploiting new market, some aim at developing new products, etc. However, to achieve certain interests, those companies with dismal business performance resort to deceit by financial fraud. According to the public information from the China Securities Regulatory Commission,256administrative penalty decisions have been issued since2008, involving about600law-breakers and300companies, and a considerable part of them are disciplined for financial fraud. So, to date, financial fraud is still rampant.People have known much about the damages of financial fraud. Financial fraud will bring about deviation of judgment to both outside investors and internal managers. Therefore, for those enterprises with dismal business, what will they do to decorate their financial reports and what are the features of financial fraud in the post financial crisis period? Whether the causes of corporate financial fraud are changed? What are the manifestations of the negative effects brought by financial fraud? The study on corporate financial fraud in the era of the post financial crisis has practical significance.The duties of the auditor is to issue a true and legal audit opinion report defining whether the financial report is fairly reflecting the company’s financial state and operating results for users. The important role of auditing, is to detect the risk of material misstatement caused by fraud via strict auditing process. The work is difficult considering the concealment and diversity of the financial fraud. With the improvement of the market economy, people call for real accounting information, which requires more attention on the audit of the financial fraud. As to financial fraud auditing, predecessors have summed up some audit steps like textbooks. These audit measures, although not foolproof, but to a great extent can curb the spread of financial fraud. But as time passes by, financial fraud auditing technology requires a new breakthrough in the face of the new environment and the new situation. From this perspective, this paper is committed to the detection and auditing methods of the corporate financial fraud in post financial crisis period.The thesis includes seven sections:Part Ⅰ:Introduce the background, researching significance, contents, framework, analysis mode and researching methods of the thesis. Make a prediction of the contribution and admit that there are some inadequacies needed to be improved.Part Ⅱ:Summarize the existing literature from four aspects, including fraud causes, financial fraud characteristics, fraud identification method and fraud auditing technique. The research abroad is earlier, deeper and more authoritative than the domestic studies. In terms of fraud causes, the existing risk factor theory is quite perfect. However, no complete practical system has been accepted by academia in the area of fraud identification method and fraud auditing technique, which is in need of continuing research and study.Part Ⅲ:In order to curb or eliminate fraud, we need to know what fraud is and how fraud is formed firstly. Therefore, this section introduces its meaning, types and cause theory. Although there’s no unified definition of fraud, but there is obvious reference criterion to judge fraud, that is, its intentional, fraudulent, harmful, benefit and illegality. Fraud can be classified into different categories from different angles. From the auditor’s angle, fraud associated with the material misstatement can be assorted into two categories:false financial report and misappropriation of assets. Fraud is the result of various factors, including pressure, motivation, excuse.Part IV:Focuses on financial fraud in the post financial crisis. First introduced the background and characteristics of the post financial crisis period, at this stage, the world’s financial system and economic landscape, production and trade patterns has transformed, while the new technology will play a leading role to lead companies out of the crisis; the real economy struggle to survive with inflation pressure. In this period, there may be some unique factors to trigger financial fraud, such as higher investment risks, harder corporate funding, lack of internal control, and excessive use of financial instruments. Moreover, the performance of corporate financial fraud shows new characteristics, such as the use of derivative financial instruments, fraud diversification. The consequences of financial fraud need corporate, society and the whole nation to take. It will make companies more miserable; it will hinder effective allocation of capital markets; it will reduce state tax revenue; it will impact the national macro-control.Part V:Expound the detection method and coping strategies to financial fraud. Define fraud auditing. Distinguish fraud auditing from financial audit. Summarize the characteristics of fraud auditing. Analyze some of the major existing identification methods for financial fraud in this specific era, including using analytic review to check the reasonableness of abnormal data, through analyzing asset quality to evaluate corporate assets, accounts receivable circularization, taking strictly stock-taking measures to detect the inventory fraud... Put forward some coping methods from both internal auditing and external auditing.Part VI:Case study. The author chose a photovoltaic enterprise which had been severely affected by the financial crisis as the case and analyzed its rigorous financial environment. Use the red flag indicator to detect its fraud factors. Put forward the corresponding auditing method.Part VII:Summarize the the previous content and main idea, look forward to the future development of the field. The expected contribution of this paper is:(1) newer topic, more important practical significance:in this paper, the focal issue-"corporate financial fraud" is combined with a specific background-"the post-financial crisis period", and the author discusses it from theoretical and practical aspects;(2) based on the existing financial fraud identification and audit technology, the author proposes some strategies to deal with the corporate financial fraud in post-financial crisis period.The inadequacies of this study is that:in this paper, the strategies that comes up lacks empirical research evidence; since the author did not actually involved in the audit of the analyzed case, the analysis is inevitably superficial.