A Case Study Of Financial Fraud Based On Fraud Risk Factors

Under the background of reform and opening up,China ’s securities market has begun to flourish,the healthy development of the securities market has brought convenience to corporate financing and promoted economic development.However,there are also some financial frauds in listed companies for improper purposes.Fraud not only damages the future development of enterprises,but also makes the users of financial information suffer huge losses,and seriously affects the order and mutual trust foundation of the securities market.Therefore,it is particularly important to find the fundamental governance strategy by using the relevant fraud theory to clarify the fundamental motivation of enterprises to carry out financial fraud.Under the background of the implementation of the new ’ Securities Law ’ and the transformation of the garment design industry,based on the fraud risk factors theory,this paper analyzes the financial fraud case with various fraud methods of BOBAOLONG witch the insufficient competence certified public accountants involved as well,and explores the underlying motivation behind the financial fraud of BOBAOLONG.After investigation,it can be found that although BOBAOLONG is a listed company,a large number of equity is concentrated in the hands of the founder and his family members,which has the characteristics of ’ one share dominance ’;its business is multi-point development,and design income is an important profit contribution point.Combing the timeline of fraud events and the impact of multiple parties,analysing the means of fraud finds that it inflates the operating income through the relevant parties;flowing the raised fund out through guarantees and supplier exchanges,using ’ non-current assets ’ to achieve capital extracorporeal circulation supplemented,using false disclosure help achieve their financial fraud.On the basis of the above analysis,it is found that the financial fraud factors are as follows: the real controller ’s desire for self-interest and the inefficient use of corporate financing constitute the company’s motivation for financial fraud;The absence of corporate culture construction and the top-down lack of ethics from executives to employees have promoted the formation of fraud,from the psychological aspect of personnel;from the perspective of fraud opportunities,the dominance of a single share,the failure of independent directors performing their duties and the failure of internal control give the company space to fraud;the weakness of internal audit,the insufficient competence certified public accountants and the executive engagement reduces the risk of exposure;difficulties for investors to obtain compensation,the insufficient punishment of the old " Securities Law " and the CSRC ’s investigation takes too long makes the punishment after the fraud exposure being insufficient to deter,which ultimately constitutes the motivation of financial fraud of BOBAOLONG.The past things can not be changed,the future is the direction of our efforts.This article proposes prevention and control measures according to the classification of fraud risk factors.In terms of reducing fraud opportunities,must improve corporate governance mechanisms,optimize equity structure,and improve internal controls;in terms of improving exposure risks,must strengthen internal supervision,play the role of independent directors,introduce external funds,enhance external supervision,and assess collective fraud from multiple perspectives;in terms of increasing the cost of illegal violations,we must improve the CSRC ’s deterrence,increase penalties,actively improve the representative litigation system and actively guide investor protection;in terms of enhancing the role of moral,must strengthen the construction of corporate culture,promote the transformation of corporate integrity into moral capital,and eliminate the worries of accountants who refuse to conspire;in terms of eliminating fraud motives,must build a multi-level market trading system,improve the efficiency of enterprise capital use,strengthen the supervision of equity pledge,and improve the disclosure regulations of ’ other receivables ’.The above suggestions on the prevention and control of financial fraud are believed to provide a feasible way to eliminate financial fraud to a certain extent.