Empirical Research On Internal Control And Financial Fraud Of Listed Companies

With the development of China’s securities market, financial fraud has become a veryprominent problem in today’s society, seriously interfering with the resource allocationfunction of the securities market, damaging the interests of investors. Financial fraud is anintentional act, a fraud who adopts the financial fraud and other illegal means to pursuetheir own interests damage the interests of others. Effective internal control can not onlyreasonably assure that the financial reports and related information is reliable, but also canimprove business efficiency and effectiveness, so as to promote the long-term developmentof enterprises. There are many reasons for financial fraud, but if the internal control hasdeficiencies, it may create opportunities for trying to corrupt, thereby increasing theprobability of fraud.This paper attempts to explore this issue from the perspective of internal control. Thearticle is divided into five parts. The first part is the introduction, mainly introducing thebackground and significance of the article, the research content and the method, theinnovation point of this article, this part clarifies the feasibility of study on internal controland financial fraud. This part also reviewed the domestic and foreign relevant internalcontrol and financial fraud literature, the part of foreign literature include two aspects,internal control research and financial fraud research, the part of domestic literature ismainly divided into five aspects, study for financial fraud of listing corporation, the boardof directors and financial fraud, corporate governance, financial situation and financialfraud, internal control and accounting information quality, the effectiveness of internalcontrol. Only fully understanding the research achievements in this field can choose theirown research perspective. The second part introduces the related theory of internal controland financial fraud and analyzes the relationship of financial fraud and internal control fromthe five elements of internal control. The theoretical analysis is the basis of the empiricalpart. The third part is empirical research design of internal control and financial fraud,selecting financial fraud or not as dependent variable, Leadership structure, Set up fourcommittees, The board shareholding and Accounts receivable to total assets ratio, and Theoperating cash flow to total assets ratio, Board meeting frequency, The size of the board ofsupervisors and The audit report of internal control as explanatory variables, in order toensure the reliability of the model, the size of companies, asset-liability ratio and rate ofreturn on net assets as control variables, Binary Logistic models is established to study itsrelationship. The fourth part analyses the empirical results of internal control and financialfraud. Accounts receivable to total assets ratio, The number of board meetings havesignificant positive correlation with financial fraud. Leadership structure, The size of theboard of supervisors and The disclosure of audit report on internal control have negativecorrelation with financial fraud. The fifth part is that the achievements of this dissertationare summarized, and then corresponding suggestions and measures are put forward,improving Board system, the accounts receivable internal control, the efficiency of board ofsupervisors and the system of internal control verification.This paper analyzes whether Leadership structure, Accounts receivable to total assetsratio, Board meeting frequency, Size of the board of supervisors and Internal controlverification report has effect on financial fraud or not from the theoretical analysis andempirical analysis, with the introduction of the relevant norms and guidelines of internalcontrol, China’s listing Corporation information disclosure of internal control is morecomprehensive, so this favors comprehensive evaluation of internal control, laying thegroundwork for further research on internal control and financial fraud.