Research On Financial Fraud Behavior Of "ST Kangmei" Based On Crime Theory

With the development of China's pharmaceutical manufacturing industry,financial fraud cases have been exposed one after another,especially in recent years.Tianmu Pharmaceutical,ST Crown,Erkang Pharmaceutical,Shengjitang,etc.misled investors to make wrong decisions,seriously damaged the interests of stakeholders and affected the normal development of listed companies in the pharmaceutical industry.The complexity and diversity of fraud means,the length of fraud time span,and the continuous rise of fraud amount increase the audit business difficulty and audit risk of accounting firms,and cause a huge impact on the capital market.In view of this,this paper will analyze the typical cases of financial fraud,find out the inadequacies of the supervision mechanism of listed companies,in order to provide reference for the prevention and governance of financial fraud of listed companies.As a leading enterprise of traditional Chinese medicine,Kangmei Pharmaceutical Co.,Ltd.once became the "Darling" of the capital market due to its outstanding performance in the main business,the total market value of which reached nearly 140 billion yuan in May2018,but took the initiative to become "ST Kangmei" in May 2019.The three-year financial fraud problem was finally exposed,and the fraud of monetary capital alone amounted to 88.6billion yuan,arousing widespread concern from all walks of life.Based on the review of the existing financial fraud related research,this paper uses crime theory to analyze the financial fraud of "ST Kangmei" from five aspects: Cooks(c),Recipes(R),Incentives(I),Monitoring(M)and End Results(E);and analyzes the consequences of Kangmei's fraud to the company and all stakeholders in combination with stakeholder theory.It is found that there are some defects in the corporate governance structure,such as the "one share dominates the other",the combination of the two functions of the controller and the manager,the lack of independence of the board of directors,the absence of independent directors and the weak decision-making supervision mechanism.There are some problems in the company's internal control,such as the lack of supervision and execution organization,the absence of internal audit,the low effectiveness of inspection and supervision and the inadequate implementation of controlactivities.For the sake of interest demands and corporate financing,the Governance and management make financial frauds by means of increasing monetary funds,assets,income and profits and concealing related party transactions.Kangmei's counterfeiting behavior makes the Governance and management face legal sanctions,leads to the collapse of the company's stock price and market value,the downgrade of bond credit rating and the continuous decline of profits,damages the potential income of Guangdong Zhengzhong Zhujiang certified public accountants,increases the audit risk,and affects the A-share market in a short term.In view of this,this paper suggests that listed companies should strengthen ideological and moral construction,improve legal awareness,improve corporate governance structure and strengthen internal control of the company.Accounting firms can improve the overall quality of auditors from two aspects: improving the audit risk awareness of auditors and improving the professional level of auditors.The external supervision department can strengthen the efficiency of external supervision by strengthening the punishment,establishing the system of compulsory suspension of trading,improving the compensation mechanism and making the system of forced rotation of the firm.The innovation of this paper lies in the application of crime theory to case study and in-depth analysis of St Kangmei's financial fraud.