| As an important part of the capital market,listed companies’ every move is under the supervision of the public.However,in recent years,China securities regulatory commission has investigated and dealt with numerous cases of financial fraud,not only non-listed companies,but also the number of listed companies has increased sharply.The financial goal of listed companies is to pursue profit maximization.When the true financial information reflected in the financial statements makes it difficult for the listed companies to meet the expectations of the management,the management may choose fraud,that is,providing false financial information through financial fraud can obtain greater net income.Under the existing securities market supervision system,it is difficult for regulators to reach binding agreements with listed companies to restrain and supervise their behaviors.This kind of behavior is repeatedly forbidden but still exists,what has seriously disturbed the capital market operation order,promotes the unhealthy wind in the market and increases the investor’s panic.This article uses the literature research method,case study method and comparative analysis method to analyze the financial fraud of listed companies.Firstly,it discusses the concept of financial fraud and the theoretical basis related to the analysis.Secondly,it reads a lot of literature on domestic and foreign financial fraud.The research on fraud methods,causes and governance are summarized,and then Kunming Machine Tools is selected as research objects.In terms of introducing the company’s development history,the products produced by Kunming Machine Tools were at the leading domestic level and advanced in the world.But with the downturn of the machine tool industry,the company’s market share gradually decreased.Then it introduced the background and consequences of the regulatory agency’s discovery of the company’s financial fraud.After the Kunming Machine Tool financial fraud case,the CSRC imposed administrative penalties on the company and relevant persons in charge.Many executives were resigned,management is in turmoil and investors also suffered major losses due to the sharp decline in stocks.The case is traced back to 2013—2015 of Kunming Machine Tool to clearly understand the beginning and end of it.This article thoroughly explores the company’s financial fraud methods,causes and countermeasures.The ultimate purpose of financial fraud in Kunming Machine Tools is mainly to increase profits on financial statements,which is achieved by means of accounting,and profits can be got by increasing income and reducing expenses.In terms of revenue,Kunming Machine Tool used the method of recognizing revenue,falsely calculated income,and falsely increased contract prices.About expenses,Kunming Machine Tool used a method of reducing accrual benefits and executive compensation.Non-accounting methods are also involved.About information disclosure,the inventory data disclosed in the annual report of Kunming Machine Tool has false records,and the accounts of its holding subsidiaries are significantly irregular.These financial fraud methods have significantly improved the company’s performance and made report users have false confidence in Kunming machine tools.Combined with GONE theory,the causes of financial fraud in Kunming Machine Tools are analyzed mainly due to management greed,imperfect internal control mechanisms,rigorous external auditing,financial and capital needs,and low exposure possibilities.These factors are mixed together to put the management of Kunming Machine Tool on the road to financial fraud.Finally,this article proposes feasible countermeasures from the perspectives of improving the effectiveness of internal governance and enhancing the strength of external supervision.In terms of internal governance,suggestions are made from the aspects of incentive and restraint systems,internal control systems,equity structure,professional ethics of financial personnel and diversified development.In terms of external supervision,we will elaborate from accounting firms legal systems and investors.It is expected that listed companies can be given some effective advice on preventing financial fraud. |
