A Case Study On Financial Fraud Of Tongjitang Company

Along with rapid growth in China’s capital market in recent years,the mass income has been growing and the consumption level has been gradually rising.However,along with the rapid development also brought a lot of instability,listed companies often financial fraud and other problems,which not only disturbed the good market environment,but also reduced many investors’ enthusiasm for the market.As the pillar industry of our national economy,the pharmaceutical industry has received more public attention because of the new coronavirus outbreak spreading rapidly around the world.But in recent years,pharmaceutical companies have suffered a series of scandals and been punished by the state securities watchdog for financial fraud.Financial information fraud not only affects the decision-making of users of financial report information,but also has a great impact on the healthy development of capital market.Therefore,it is of great significance to investigate the financial fraud of listed companies in pharmaceutical industry for the healthy development of pharmaceutical capital market and to protect the health and safety of public life.This paper makes a comprehensive study of financial fraud in Tongjitang based on risk factor theory by literature review,comparative analysis and case study.Based on the risk factor theory of a more comprehensive system,this paper firstly defines the concept of financial fraud and introduces the risk factor theory,information asymmetry theory and internal control theory on the basis of a comprehensive review and evaluation of domestic and foreign literature.Then it introduces the company and the process of fraud,and analyzes the financial fraud means and the consequences in detail.Then analyze the identification of financial fraud methods and on the basis of the risk factor theory,the paper analyzes the motivation of financial fraud in Tongjitang.Combining case study and theoretical background,the moral character and motive of fraudsters are analyzed from the angle of individual risk factors,and the opportunity of fraud,probability of detection and punishment are analyzed from the angle of general risk factors.Secondly,the motive of fraud is to better satisfy the needs of stakeholders and create the illusion that the company is performing well in order to avoid delisting.Third,due to the excessive concentration of stock ownership,the failure of internal control,the lack of independence and caution of the CPA,the actual controller of the company is the leading fraud opportunities;Fourth,the internal audit and supervisory departments do not play their role,the related supervision mechanism is non-existent,which reduces the possibility of fraud detection by Tongjitang Corporation;Fifth,the punishment for fraud in our country is so low that it pales in comparison with the huge profits that fraudsters make by committing financial fraud,which prompts the same family to choose financial fraud even as they face huge risks.Finally,from the perspective of corporate governance from the internal governance and external governance of other listed companies to put forward some preventive measures against financial fraud.The pharmaceutical industry is related to people’s lives and health,and has attracted the attention of all social strata in the world.In China,the development of the pharmaceutical market has been one of the bright spots of economic growth.But negative news frequently,seriously damaged the image of the pharmaceutical industry,let people lose confidence in the pharmaceutical industry.This paper will take the typical case of Tongjitang company as an example,discuss and finally come up with a strategy to deal with the financial fraud in the pharmaceutical industry,and hope to make some contributions to the study of financial fraud in our country.