A Study Of Corporate Accounting Disclosure Violations Based On Game Theory Perspective

Accounting information provided by listed companies is one of the channels through which investors can make value judgements and has a direct impact on investors’ decisions.In recent years,the number of listed companies has increased year on year,but at the same time the number of companies fined for accounting disclosure breaches has also increased.In order to ensure the orderly functioning of the securities market and to promote the healthy development of the securities market,listed companies should ensure the truthfulness,accuracy and completeness of information when disclosing accounting information.It is therefore appropriate to examine the factors influencing breaches of disclosure by listed companies and countermeasures to prevent breaches of accounting disclosure by listed companies.Based on this work,a static game model of listed companies,accounting firms and regulators with incomplete information is established,and the probability of occurrence of the corresponding game outcome is multiplied by the payoff of the game outcome of their chosen strategy to enumerate the payoff function,and after solving the three game models respectively,the Nash equilibrium solution of the mixed strategy choice of the two sides is obtained,and then the factors affecting the three sides’ strategy choice probability in each game model are analyzed.The study then analyses the factors affecting the probability of choosing a three-way strategy in each game model,introduces the Conde Nast case and transforms the mixed strategy Nash equilibrium solution into an ideal equilibrium,thus providing relevant recommendations for three-way strategies.The study concludes the following three points: first,the stringency of the regulator is an important factor affecting the game between listed companies and accounting firms and the final game situation,and the lack of regulation is the main reason why audit failures occur frequently in China,especially at two levels: first,the lack of regulation of listed companies causes listed companies to have high revenue expectations for insufficient accounting disclosure;second,the lack of regulation of accounting firms causes accounting firms to have high revenue expectations.The lack of oversight of accounting firms has led to high earnings expectations from the audit business.It is therefore necessary to increase the penalties for non-compliance by listed companies and accounting firms,to continuously increase the costs of non-compliance and to eliminate the profit expectations of non-compliance at institutional level for listed companies and accounting firms.Second,as listed companies and accounting firms repeat the game over time(in particular if listed companies choose the same accounting firm several times),the interests of listed companies and accounting firms may converge,leading to a gradual evolution of the relationship between accounting firms and listed companies into an interdependent relationship,preserving and taking over each other’s interests.Third,from a game-theoretic point of view,Conde Nast’s choice to disclose accounting irregularities and Ruihua’s choice to conduct a low-quality audit were an optimal combination of strategies based on the regulatory environment at the time.The apparent deficiencies in Ruihua’s audit procedures of Kangde Xin were not due to a lack of competence,but rather to the fact that the parties maintained a close relationship for a long period of time under an inappropriate regulatory framework,which led to a convergence of interests and ultimately to an audit contract which made it very likely that Ruihua would choose to perform a low quality audit despite knowing that Kangde Xin had disclosed inappropriate accounting information.In summary,based on an analysis of the factors affecting the likelihood of each party making a decision,recommendations are made at listed company level,accounting firm level and regulator level respectively.