Research On IPO Fraud Of GEM Based On Fraud Triangle Model

Since the 21 st century,China’s capital market has experienced rapid development and formed a relatively complete multi-plate market system.With the continuous improvement of China’s capital market,listed financing has increasingly become the best way for domestic enterprises to obtain funds.However,due to the enormous improvement of enterprise value and the sharp increase of management wealth after the IPO,the phenomenon of IPO fraud has become more and more serious in China.And the emerging GEM market has become a high incidence of fraud,which is closely related to its more relaxed listing conditions,simplified trial procedures and selective information disclosure.As a financing market for small and medium-sized innovative enterprises,the good development of GEM provides guarantee for the growth and strength of small and medium-sized enterprises and represents the strength of economic innovation and development in China.Therefore,it is imperative to deal with financial fraud of GEM enterprises and promote the healthy development of innovative enterprises.This paper takes Xintai Electric Company,the first listed company in GEM,as an example to analyze its financial fraud process.Firstly,enterprises adopt several major fraudulent means,such as fictitious receivables recovery,undercosting and concealing major items.Then,it focuses on the fraudulent enterprises’ annual reports and some publicly available information to analyze the fraudulent enterprises.Exposed financial and non-financial information,regardless of the size of assets,changes in financial indicators,cash flow,payment policy changes in any aspect,Xintai Electric has these unreasonable changes;after the means of fraud analysis and the identification of fraud in public information,based on the fraud triangle model theory,this paper from the motivation and the point of view of fraud triangle model.The causes of financial fraud of Xintai Electric Company are deeply analyzed from the three dimensions of pressure,opportunity,attitude and excuse.The slowdown of national macro-economy,the demand of executives for profits,the lack of internal control,the cooperation of intermediaries and the inadequate supervision of the market contribute to the financial fraud of Xintai Electric Company.Finally,on the basis of the analysis of the causes of Xintai Electric Fraud,it is concluded that the enterprises themselves need to make efforts to improve the quality of management,establish a good corporate culture and strengthen internal control.For the external environment,we need to improve the appointment mechanism of the firms and broaden the financing channels.All parties work together to create a good investment environment for the vast number of investors.