Research On The Occupation Of Non-operating Funds By Flower Kingco-Engineering Inc.’s Major Shareholders

The problem of occupation of non-operating funds has always been a persistent problem in the capital market.In recent years,the number of listed companies punished for occupation of non-operating funds by major shareholders is still increasing,and the ways of occupation have also shown a trend of diversification and concealment.Among the enterprises with illegal capital occupation,more than half of the enterprises’ internal control self-assessment reports show that there are major defects in internal control,and weak internal control brings more opportunities for non-operating capital occupation by major shareholders.It was revealed that the amount of non-operating funds occupied by the major shareholder of ST Kao reached hundreds of millions of yuan,and the funds were occupied in various ways.At the same time,the internal control audit report of ST Kao was issued a negative opinion.Based on this,the core problem of this study is: the non-operating capital occupation of ST Kao’s major shareholders.There are four specific research dimensions:(1)What are the ways in which non-operating funds are occupied by major shareholders?(2)How do internal control defects related to capital occupation lead to non-operating capital occupation by major shareholders?(3)What are the root causes of internal control deficiencies related to capital occupation?(3)How to optimize ST Kao’s internal control system to restrain the non-operating capital occupation of major shareholders?This paper first adopts the normative research method to sort out the relevant literature,which is used as the research basis of this paper.Secondly,the capital occupancy situation of the capital market and construction industry in the past five years is sorted out by means of statistical analysis,and ST Kao,which has various occupancy methods,is selected as the research object.Then use the case study method to first identify the specific ways of non-operating capital occupation by major shareholders,analyze the impact path of internal control defects on the non-operating capital occupation of major shareholders,explore the fundamental reasons for the existence of internal control defects,and put forward targeted measures for this.Optimization suggestions to achieve the purpose of inhibiting the occupation of non-operating funds by major shareholders.This paper draws the conclusions:(1)The major shareholders occupy the prepayment of the house through non-substantial related party transactions,occupy the project reserve fund,occupy the sales of the work-to-house and the profit and occupy the payment to the supplier in four ways,which constitute a non-operating business.(2)The lack of related party transaction pricing system and the weak approval of related party transactions;the imperfect project reserve fund system,the lax approval of reserve fund expenditure,and the poor follow-up tracking of the reserve fund;the lack of sales collection approval,the lack of payment schedule regulations,and the large Defects in the design and implementation of internal controls,such as the lack of an advance payment system and lax payment approval,led to the occupation of non-operating funds by major shareholders.There are defects in ST Kao’s information disclosure work related to related party transactions and capital occupation,resulting in the long-term occupation of funds by major shareholders but not discovered.(3)Based on the framework analysis of the five elements of internal control,the failure of ST Kao’s internal control stems from the poor control environment of ST Kao,imperfect ownership structure and governance structure;weak risk awareness and lack of specialized risk management institutions;irregular control activities and lack of Three major and one major system,the internal control system is not well designed and implemented;the information exchange mechanism within the company is not smooth;the internal supervision of independent directors,the board of supervisors and the audit committee is weak.(4)ST Kao not only needs to improve the internal control environment,strengthen the risk assessment ability,strengthen the internal supervision mechanism,and improve the information disclosure,but also needs to optimize the specific internal control system,including a series of measures such as improving the system design and strengthening the system implementation.In this way,the behavior of non-operating capital occupation by major shareholders can be restrained.