The Research On Financial Fraud Of Wan Fu Biotechnology Company Based On Theory Of Fraud Risk Factors

Financial fraud has been the focus of Academia and government departments for a long time. Chinese government has formulated a lot of laws and regulations to prevent the fraud and to regulate the securities market, however, financial fraud events still emerge, therefore, the study of financial fraud still has a realistic significance.The article takes Wan Fu Biotechnology Company as study object, and its’ main fraud means are as the following:making up customers and contracts; inflating assets; and related party transaction and significant information are undisclosed.Based on the theory of fraud risk factors, the paper tries to find out the causes of Wan’s financial fraud from three aspects, the general risk factors, the individual risk factors and the special ones. From the general risk factors, we can see that the incomplete legal system, imbalanced government structure provide opportunity for corporate fraud; the fail of government, agencies and internal audit institutions reduces the possibility of finding out the fraud; besides, ineffective punishment has also increased the possibility of fraud. Then from the individual angel, with low ethics of managers and accountants, and to meet the listing standards and other requirements, the fraud occurs. Besides,this paper adds a special factor, namely the local government protectionism, according to China’s unique institutional backgrounds and cultural environment, local governments tend to provide tax exemptions, subsidies, etc. to encourage the local companies to be listed, which urged the fraud act.According to the causes, the paper puts forward some suggestions. To curb the fraud opportunities, our government should update laws and regulations, and corporate must improve its internal governance structure; then, to increase the likelihood of discovering out fraud, the government should strengthen its supervision, and ensure the independence of agencies and internal audit departments; at the same time, Securities Regulatory Commission must increase penalties for fraud corporate;finally, to break the local government protectionism, local government performance evaluation criteria must be changed.