Research On Related Transaction Fraud Of Listed Companies From A Listed Company As An Example

Since the21st century, China’s economy has developed rapidly. With the booming of theeconomy, the competition between enterprises enters the white-hot stage. After the brutal marketcompetition, some enterprises take the path of alliance between giants and merger and reorganization forthe purpose of better development or under the market pressure. Consequently, there are more and moreenterprises in the forms of group company. The relation between the group company and its branches andsubsidiaries is the related party relationships and their transaction is the related transaction. In the relatedtransaction, as one party can control or greatly affect the financial and production operation decision of theother party, so such transaction is often based on unfair and unreasonable grounds. The listed companyoften manipulate profits, whitewash statements and improve achievements through such unfair relatedtransaction, so as to achieve their ulterior motives. The related transaction fraud will not only damage theinterests of medium and small investors, but also endanger the sound development of capital market.Therefore, the related transaction is the focus risk zone that relevant supervision department and CPA needto pay attention to and also the key point the listed company need to control. To strengthen the studytowards the related transaction fraud, the only aims are not just improving the relevant regulatory system,the internal management system and expanding the audit theory, but also improve the transparency ofinformation disclosure and the quality of financial information of listed company and maintain the soundand development of securities market and safe and orderly operation of market economy. Considering this,with the fraud of A company listed by hiding the related transaction as the research case, this paper studiesthe strategy selection of certified accountant in auditing the related party transaction by using literatureresearch and case analysis methods, which is of great realistic significance.First, this paper introduces the relevant literatures of related party transaction, cause of relatedtransaction fraud, methods, risks in related transaction auditing and the relationship between relatedtransaction and internal management of listed company, government regulation. Then, with the informationasymmetry theory and rational agent theory related transaction fraud cause theory as the theoretical support,this paper builds the framework of the theoretical analysis of related transaction fraud. By virtue of such theoretical support, it is concluded by analyzing such case that the listed company has the followingproblems: hiding its related parties, related transaction, wash sale fraud behavior. It is concluded fromfurther analysis that the reason for such problems of a company listed is that the management wants torealize refinancing and maximization of stock liquidation，take advantage of the poor supervision system,the listed companies’ imperfect internal management and the CPA audits’ negligence, also on the pretext topromote the company’s development and protect investor’s interests to progress related transaction fraud.Finally, the thesis analyzes how to prevent the listed companies from taking advantage of relatedtransactions to commit fraud by three angles: the internal management of a listed company, certificatedpublic accountant and the relevant supervision department. Then the following conclusions are made: onthe one hand, the listed company must establish strict management system in the internal company,improve the corporate governance structure and the effectiveness of independent director and internal audit.On the other hand, CPA should promote their professional competence ability. In the course of audit,certified public accountants should have professional skepticism and due diligence, strictly implementingthe relevant audit procedures. Meanwhile, the regulatory body should make the well-established regulatorysystem towards the listed company’s related transactions, clearly define the responsibilities of certifiedaccountant and audited unit in the related transaction fraud, and punish the personnel participating in therelated transaction fraud.