Case Study On Financial Fraud Of Shanghai DZH Limited

Since the establishment of China's stock market,financial fraud incidents have occurred one after another.The number of financial fraud companies has increased and the amount of fraud is billions,and the impact of financial fraud has gradually expanded.Faced with more than 3,000 listed companies,the CSRC has difficulty in improving its regulatory efficiency,insufficient deterrence of punishment means and unequal punishment intensity with fraudulent earnings,which has made many companies with difficulty in operating after listing hollow,and has spared no effort to maintain their corporate image by financial fraud and deceive investors.Therefore,this paper discusses the fraudulent practices of penalized companies,and aims at the fraudulent practices of penalized companies.It is urgent to seek a good way to deal with fraud by means of fraud.This paper adopts case analysis method and chooses Shanghai DZH Limited for research.Shanghai DZH Limited is a well-known software supplier of securities services.It has a wide customer base,involving institutional investors,investment consultants,securities companies and individual investors.The company has a wide range of products,covering a variety of investment analysis software from mid-end to high-end.At the beginning of the company's listing,it happened that the Chinese stock market was in a downturn,the company's product sales were declining,and its main business was losing money continuously.Faced with the pressures of the impending ST,the company took risks and embarked on the road of financial fraud.Six fraudulent methods were used,of which four were used to increase revenue in different forms in 2013.The other two methods involved reducing cost and confirming purchasing profit in advance.The above-mentioned means are mainly used in the fourth quarter,especially in December before the false increase of balance sheet date,which makes the net profit in the fourth quarter account for 918.51% of the net profit in the whole year.The total false profit exceeds 210 million yuan.The company has been fined 600,000 yuan by the SFC,and the relevant responsible persons have also been fined from 30,000 yuan to 300,000 yuan.In addition to administrative penalties,Big Wisdom also faces civil lawsuits against securities false statements filed by small and medium shareholders.The total amount of lawsuits filed by Shanghai First Intermediate People's Court and Shanghai Financial Court is 51,507.62 million yuan.As of January 31,2019,the total amount of compensation paid by the company is 26,938,584.32 yuan.The final judgment confirms that Lixin AccountingFirm has made civil claims.Compensation is jointly and severally liable.This judicial judgment puts forward higher requirements for the audit quality of accounting firms.At the same time,letting fraudulent companies bear civil liability for compensation is an important supplement and guarantee to the phenomenon of insufficient deterrence of administrative penalties.This paper uses GONE theory to analyze the causes of fraud.Firstly,based on the analysis of Greed factor,it is concluded that a small number of major shareholders are eager to transfer their wealth to individuals because of their greed.In order to maintain their personal reputation,the management of a company improperly adopts radical investment strategy.The management of a company is far from high-minded and carries out unrelated diversification.Secondly,based on the analysis of Opportunity factor,it is concluded that there are serious hidden dangers in corporate governance;the organizational structure design of the company is mere formality and does not play a substantive role;and the lack of independence of the firm provides opportunities for the fraud of great wisdom.Thirdly,based on the Need factor analysis,it is concluded that only profit can avoid being ST by CSRC in 2013.Fourthly,based on the Exposure factor analysis,it is concluded that auditors are not diligent and responsible enough;the interns of firms are weak in finding problems;the punishment of the CSRC is not strong enough;the first two factors reduce the possibility of exposure;the third factor makes the cost of punishment lower after exposure.Finally,this paper draws the following case enlightenment.First,the enlightenment to listed companies suggests that listed companies should improve their governance structure from the following aspects: optimizing the company's ownership structure,establishing the employee stock ownership system,implementing the post incompatibility system,actively implementing the independent director system,and giving full play to the functions of the company's board of supervisors.Secondly,it suggests that firms should implement risk-oriented auditing,rationally allocate human resources and avoid low-cost competition.It is suggested that CPA should maintain professional skepticism and ensure the integrity of audit working papers.Thirdly,the enlightenment to the minority shareholders is that they should establish the consciousness of safeguarding their rights and bring civil lawsuits to the courts when necessary.Fourthly,inspiration to the supervisory and judicial departments suggests that the supervisory authorities optimize the allocation of supervisory power,improve the efficiency of supervision,reduce the lag of supervision,increase the punishment of fraud,and improve the civil litigation system of accounting fraud.