The Role Of The Internal Audit On Guarding Against Financial Fraud Of Listed Company In Our Country

In the early21st century, China’s securities market is prosperous, while the FinancialFraud events appear from time to time. Many famous enterprises uninterruptedly trappedin the eddy of financial fraud incident, such as “Yin guang xia”,“Lam shares”,“KelonElectric”,“Galaxy Technology”,“Wanfu Biotechnology.” The disclosure of financial fraudincident of these corporations make the entire stock market shrouded in gloom of financialfraud, resulting in the stock price sharply decline. Many accounting firms also implicatedby this, even some well-known international and domestic firm of Certified PublicAccountants. All of these lead mistakes investors lose their sense of security forinvestments. Financial fraud has become the common phenomenon in the stock marketbecause of the frequency of listed companies’ financial fraud in China. Consequently, thesecurities market reputation; the vital interests of the investors and healthy development ofthe CPA profession are severely influenced. Therefore, identification and prevention offinancial fraud in China’s securities market are important theoretically and practically.Firstly, this paper describes the concepts and characteristics of listed companies’financial fraud, then analyzes the motives and first of financial fraud. Take two examplesthat the internal audit effect or not, dig out the underlying causes of financial fraud, inorder to learn from successful experiences, to prevent failures. From the two examples, theprevention of financial fraud have to set about from two sides. From the outside, the stateshould establish a sound system of laws and regulations for the stock market, reducing thechance of corporate financial fraud. And the state should advocate morality, and establish agood moral environment, reducing the incidence of rationalization of financial fraud. Fromthe inside, the internal audit department should fully play its functions of supervision,management, so that we can control effectively the financial fraud from the corrupt source.Therefore, effective oversight of the disclosure of financial statements and informationrequires not only effective guidance from policy, but needs to the important role of internalaudit in corporate governance. Everything takes time and reforms, unaccepted the stockmarket. Hoping the more attentions will pay to the healthy development of the securitiesmarket. In return, the securities market will provide a good investment environment for investors.