Case Study Of Financial Fraud In The Company Of SanXia New Building Materials And Its Enlightenment

With steady and rapid development of economy, the importance of accounting work gradually highlights. False misstatements of accounting report, however, are in constant pull back economic progress. Since twentieth Century, the global scope of financial fraud cases occur frequently, bring huge loss to the world economy. This paper combined with the financial fraud case of Hubei Sanxia New Building Materials Co., Ltd,on the basis of case studies to seek effective methods of financial fraud prevention. Firstly, the writer introduced the current research condition which was made by the scholars at home and abroad for the financial fraud in listed companies, made systematic statement for the current study about the financial fraud from the views of identification, techniques, contributing factors, precaution as well as governance, and made an illustration of the achievements and deficiencies of current studies. Secondly, based on the reference of the related theories, the writer identified the omens for the fraud in Hubei Sanxia New Building Materials Co., Ltd form four aspects: whether the company's industry environment is turbulent; whether the company has perfect internal governance; whether the financial data are reasonable; whether the accounting firms for external audit are regular. By this way, the writer revealed the specific fraud methods in the fraud case. Thirdly, the writer focused on the analysis for the form reasons in the fraud case in Hubei Sanxia New Building Materials Co., Ltd from two aspects, the motivation and the opportunity. Factors such as poor corporate performance, administrators who go after maximized benefits, defective corporate internal governance system will cause the fraud, invalid supervision mechanism in securities market, the dependence of on listed companies as well as cheap violation cost contribute to fraud. At last, form the case, the writer got such enlightenment:if we want to avoid the fraud, we must reduce the opportunity for the financial fraud. The paper has the application values as follows:the fraud case of Hubei Sanxia New Building Materials Co., Ltd is a typical case and according to omens which appeared in the case, the investors can allude to other companies, identified omens of the financial fraud and avoid the losses which were caused by the financial fraud in the company; the writer put forward the suggestion of founding the risk cash deposit for the financial fraud which was paid by governments, enterprises and accountancy firms. Such suggestions created a new way for protecting the rights and interests of the investors, which were more beneficial to the investors.