Study On Financial Due Diligence Of State-owned Capital Operating Company’s Investment

It is a new attempt in China’s reform process to establish state-owned capital operation company.State-owned capital operating company is the direct sponsor representative of state-owned assets,which holds a stake in state-owned enterprises and exercises the investor responsibility on behalf of SASAC.As the implementation carrier of state-owned capital strategy and state-owned capital operation budget,state-owned capital operation company aims to maintain and increase the state-owned property.However,in the process of investment and operation of state-owned capital operation companies,the state-owned assets have been lost in different degrees.Among them,because of the inadequate and inveracious financial due diligence investigation,the investment object is deviating from corporate strategy,it is an important reason of the loss of the state-owned assets.As "umbrella" of investment activities,financial due diligence can not only find financial and financial vulnerabilities of investment object,but also can evaluate enterprise profit ability,predict enterprise future prospects,understand the status of the real assets and liabilities and enterprise management,help the investors to determine whether the trading activities is conform to its own goals and principles or not and reduce the information asymmetry of both parties.But in the process of current financial due diligence,due diligence personnel is a little bit subjective of due diligence investigation methods and principles,so there may be some mistakes,of course,there will be a saving grace.in order to provide reference for the due diligence personnel,the author puts forward some ideas based on the theory and the case study.The method used in this paper is normative analysis and case analysis.The article starts from the basic theory.Based on reading domestic and foreign literatures and summarizing,the function and method of financial due diligence are f-ound out.And then this paper took "A" state-owned capital operating company entrusts "Y" accounting firm to investigate "ABC" limited liability company before investing as a case.This paper introduced the concept,method and operation flow of financial due diligence firstly,and analyzed its success and failure from the perspective of accounting firm,and find out the problems and references.Through research,this paper found out the following conclusions:It is necessary to select an expert to conduct the investigation when the financial due diligence is carried out.The investigation should be conducted according to the process of investigation,On the basis of meeting the principle of cost-benefit,it should be as comprehensive as possible.And pay attention to some issues,such as: target enterprise’s cash flow,industry analysis,long-term strategic analysis,income growth driving analysis,etc.For the risk of the identified target enterprise,it is necessary to distinguish the potential impact of the client according to the requirements of the client,and help it identify the key risk points.Only by constantly summarizing,the financial due diligence can provide more reasonable suggestions for the client’s decision analysis.