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An Analysis On Regulating Listed Companies’ Financial Restatements Problem In China

Posted on:2015-01-14Degree:MasterType:Thesis
Country:ChinaCandidate:G L ZhangFull Text:PDF
GTID:2309330467456384Subject:Accounting
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In this modern economic society, information becomes the key factor. However, in capital market, accounting information is important material for investors to make investment decisions. In recent years, restatement continued in listed companies. Financial restatement means that there are material misstatements in previous financial reports released or they are in poor quality, therefore, internal supervision should be strengthened. Financial restatement leads to low efficiency of financial information. Those problems are in urgency to be solved; Domestic research about financial information released by listed companies largely starts from financial fraud, and research on financial restatement is of some practical significance.While China’s security market continued to expand and with the ever improved market institution, investment deciders raise their requirements for the quality of financial information released in security market by listed companies. Financial information is contained in financial reports released by companies in security market, which is an important source for investors to acquire financial information. In real practice, restatement by listed companies indicates that there are big mistakes in their financial information published in previous stage and thus correction is needed. In general speaking, restatement could indicate the possibility of earning manipulation previously. At the same time, restatement reflects insufficient management of the companies and the lack of internal control of financial fraud. Financial restating couldn’t stop report users suspecting published financial information, and to some extent, it damages the authority of financial reports. Therefore, to protect investors’ legal interest and sustain a healthy development of the security market, it is necessary to reduce financial restatement.This thesis mainly adopts normative research method, accompanied by comparative analysis, graphical method, case analysis and etc. On the basis of research outcomes about financial restatement from in and abroad, the author considers the characteristics of domestic listed companies and their financial restatement, expecting to provide some suggestions for domestic listed companies to make some improvement concerning financial restatement.This thesis consists of six sections. In the first section, which introduces the research background and significance of this research, as well as illustrates the research logics and methods, explains the basic framework of the research. The second section is the basic theories about financial restatement. The author first introduces the concept, the defining of the concept of financial restatement and how it works and then illustrates relevant theories including accountability theory, mechanical hypothesis, information asymmetry theory and internal control theory. They are theoretical foundation of this research. The third section introduces problems in financial restatement and their economic outcomes in domestic listed companies. So the third section includes first, the general situation of the financial restatement in domestic listed companies, from two aspects separately:quality and quantity; second, five problems about financial restatement are raised:wide range and much capital involved; profit manipulation is obvious; non-standard expression; not timely publishing of information; incomplete laws and institutions. The final is the economic outcomes of financial restatement. The fourth section is an analysis on the motives of financial restatement. In the fifth section, a case study of company A is made to review the situation of financial restatement, the reasons and results. And finally people can get some enlightenment:the quality of independent audit is worrying; internal supervision is weak and etc. The author puts forward some suggestions in the sixth section to rectify corporate financial restatement. Starting from the problems and reasons analyzed above, suggestions are raised from six aspects:ownership structure, internal governance, external supervision and etc.
Keywords/Search Tags:Financial restatement, Listed companies, System of accountability, Internal supervision
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