Research On Financial Restatement Of Kangmei Pharmaceutical From The Perspective Of Internal Control Defects

Financial report,as the carrier of the company's financial status and operating results,is an important basis for external value users to make value judgments.Therefore,the quality of information disclosure is important.However,in recent years,corporate financial restatements have occurred frequently,and major previous accounting error corrections related to financial fraud have also frequently occurred.There were errors,misleading claims or omissions in the previous financial report information,and it also revealed that the internal control of the enterprise was flawed.The adverse consequences of the internal control defect affected the quality of the financial report information.Therefore,corporate financial restatement from the perspective of internal control defects is worth studying.This article takes Kangmei Pharmaceutical as the research object,and analyzes Kangmei Pharmaceutical's annual report,announcement of previous accounting error corrections,and the CSRC's regulatory inquiry letter for Kangmei Pharmaceutical's previous accounting error corrections.This article focuses on the correction of previous accounting errors that occurred in Kangmei Pharmaceutical on April 30,2019.From the perspective of internal control deficiencies,this article studies the reasons for Kangmei Pharmaceutical's financial restatement,the path of internal control defects on financial restatement,and the economic consequences of financial restatement.First,the case background of the financial restatement of Kangmei Pharmaceutical is introduced,which mainly includes the basic profile of the company,the basic status of the financial restatement,and the basic overview of internal control.Secondly,it analyzes that the motivation of Kangmei Pharmaceutical's financial restatement is the pressure of external supervision.Thirdly,it analyzes the impact path of Kangmei Pharmaceutical's internal control defects on financial restatement.Kangmei Pharmaceutical mainly has the following internal control defects: in the control environment,the governance structure is defective,the company's strategy is excessively expanded,and the corporate culture lacks integrity;in terms of risk assessment,the risk assessment is not in place;in terms of control activities,the authorization of approval and control failures in the procurement and payment cycle,improper property protection controls in the production and inventory cycle,ineffective control of the accounting system in the sales and collection cycle,inadequate use of funds in the monetary fund cycle,failure of performance evaluation control in human resources and pay cycle;in terms of information and communication,information disclosure is not transparent;in terms of internal supervision,internal supervision is superficial.The above-mentioned internal control deficiencies have led to major misstatements at the level of management's determination and financial statements,which has created hidden dangers for the correction of previous accounting errors.Then,it analyzes the following economic consequences of Kangmei Pharmaceutical's financial restatement: falling into financing difficulties,serious evaporation of market value,and facing shareholder claims.Finally,through the above studies,the following three conclusions are drawn: First,the correction of major previous accounting errors has revealed flaws in the internal control of corporate financial reporting and non-financial reporting.Second,the control environment is a key influencing factor for the effective operation of other internal control elements and ensuring the quality of financial report information.Third,the correction of major previous accounting errors is likely to bring the following economic consequences: falling into financing difficulties,falling company market value,and facing legal proceedings.Based on the above research,in order to promote the construction of internal control and standardize the disclosure of financial information,this article puts forward the following five suggestions for Kangmei Pharmaceutical: improve the governance check and balance mechanism,rectify the company's internal control team,improve control activity measures,establish an information management system,and strengthen enterprise internal supervision.At the same time,it provides two suggestions for regulators: improve the financial restatement punishment mechanism and improve the external market supervision mechanism.