A Case Study About Financial Fraud From W Ltd

After more than20years of development, China’s securities market has made marvelous achievements. Also financial fraud phenomenon has existed at the same time. The influence of the securities market on national economy is so great and due to various factors, such as information asymmetry and imperfect supervision, the financial frauds in China have been reported many times. The listed companies make legal challenge to the securities market through various fraud means, in order to meet the listing requirements, or pursue the specific purposes. No doubt those kinds of behaviors disrupt the normal operation of the capital market, and infringe upon the lawful rights and interests of investors at well. The regulators face huge regulatory pressure and should take effective measures, or the credibility of the regulators and our security market will be lost, investors would lose confidence neither. This will lead to China’s securities market no longer be able to continue operations.This paper uses the theory and practice, combining qualitative analysis with quantitative analysis method, and selects the Listed Company W for a case study. The company is a typical example of enterprise financial fraud in our country, thus has the representative significance and research significance. Firstly the paper studies the research achievements of financial frauds, then gives a brief introduction to the company,after that the paper introduces its financial fraud means on inflated assets and income,fictional cash flow income and fictional contract, and describes after a sudden exposure,the company is faced with its operating dilemma,which is about a liquidity shortage, operating losses and a variety of abnormal phenomenon (large provision for impairment loss, selling of a large number of idle assets, etc.).By using the Financial Fraud Triangle Theory, the paper analyses the deep reasons of the company’s financial fraud, these reasons are purposes of money encirclement, feeble internal controls,invalid external supervision,low illegal cost. On the basis of case analysis, the paper tries to put forward some measures and countermeasures on external supervision for the management of listed company financial fraud, involving the Issuance Examination Committee, intermediary organizations, the perfection of laws and regulations and credibility system and forbid system, etc.