Papers Category:Accounting And Auditing Papers
- Audit Papers
Post Time:2013-6-3 20:55:00
Abstract: At present, the financial statements of the fraud have become major issues plagued the global economy, the financial statements if fraud occurs, not only will cause distortion of accounting information, the relevant stakeholders will result in a negative impact of social credit crisis in order to effectively develop social economy, to crack down on financial statements fraud. article is to analyze financial statements fraud causes and hazards based on the corresponding control strategies.
Keywords: financial statements fraud, stakeholders, audit measures
First, the definition of financial statements fraud
Financial statements and accounting entity is to provide a reflection of external financial position and business accounting entity's financial statements, including balance sheet, income statement, cash flow statement or statement of changes in financial position, schedules and notes.
Financial statements fraud refers to the figures shown in the report on the financial statements or conduct a subjective misstated or ignored, so as to achieve the purpose of deceiving users of the report. Generally, the financial statements of fraud include a wide variety of different techniques, the most commonly used approaches exaggerated assets and income, the error is not sufficient disclosure or disclosure omissions, liabilities and expenses underreporting in the financial statement audit practice, CPA accordance with the rules, usually only concern the following types of fraud: Due to the preparation of false financial reports resulting misstatements and appropriation of property as a result of misstatements.
Preparation of false financial reporting fraud, including the amount of intentional misstatements in the financial statements and disclosures in the financial statements intentionally omitted two content causes mainly in three aspects: First, the management of the motive for profit maximization, in an attempt to achieve profits by manipulating affect the use of by the unit being audited results for the purpose of perception and profitability, and second, pressure and power could make these acts rise to the level of preparation of false financial reports, three due to withstand the pressure to meet market expectations or the pursuit of individual performance-based compensation maximum technology, management may deliberately through the preparation of material misstatement of the financial statements which led to false financial reports.
Misappropriate assets are those assets of the audited entity's management or employees of the audited entity occupied by illegal means, including staff stealing small amounts of cash and non-essential assets and the management is difficult to find the means through disguise or conceal acts of embezzlement of assets. Misappropriate assets The main methods: money received corruption, theft of physical assets or intangible assets, so that the audited entity for goods not received or received payment services, will be audited entity assets diverted to private.
Second, the causes of the financial statements fraud
Efficiency in the capital markets to provide investors with a company's future prospects of useful information related to the important role that profit figures when the company tried to meet or exceed the strategic analysis of earnings management to achieve profitability targets to force or when the management and reporting of earnings bonus associated, management options may result in earnings misstated accounting practices will be encouraged. engaged in the management of the financial statements can be obtained when fraud such as raising salaries, increasing the value of company stock held by individuals, enhancing access to jobs and other personal benefits, so implemented by management override control over the financial statements of fraud.
For some listed companies operating in the normal channels can not get over interests in the stock market, "ring" to more money, leading to lawlessness, wanton acts of fabricating false accounting information and therefore also the financial statements of economic interests over fraud produce one of the motives. enable companies to obtain long-term credit financing or additional capital investment to maintain or create a strong value of the stock performance deficiencies conceal, conceal fictitious sales or misstatements of assets, temporary solve financial difficulties, which are fraud is to promote the cause of the financial statements.
Because accountants are direct participants in financial fraud, long enough attention accounting professional ethics education, the company did not develop accounting professional standards and accountants legal awareness is not strong, in order to meet the leadership of the company's adverse psychological, thus violating the realistic and objective justice ethics. Additionally, individuals were driven by economic interests have led some accountants deliberately forged, altered, concealed or destroyed accounting documents, used his position to carry out fraud.
Third, the financial statements of the dangers of fraud
Fraud financial statements of listed companies themselves healthy survival and development of long-term harm, such as "wilderness", "Joan source", "red", "Zhengbaiwen", "Zhangjiajie" and collapse of the company, are derived from the financial Report Fraud flooding and corporate internal control mechanisms break down. current enterprise management decision-making relies on the information provided by financial accounting to achieve the enterprise past achievements and shortcomings evaluation, and as a basis for future economic activity of the enterprise to make a reasonable prediction, decision-making and the planning the enterprise providing false financial reporting by management accounting information for financial fraud, this is due to maximize their own interests to consider, but should be seen in the long run so false accounting information management decisions is clearly insufficient to meet future requirements, should also seriously weakened the accounting functions, will eventually lead to distortion of management decision-making authority, and if long-term sustainability, which will inevitably undermine the basis for enterprise management and internal control mechanisms, constraints to improve the competitiveness of enterprises. Not only that but also for the benefit of stakeholders causing serious damage.
Interests diversification trend is the objective reality of the market economy, and the economic interests of the diverse stakeholders is the driving force of economic activity, including potential investors, employees and government departments. Investors could then decide whether to invest in companies, employees should be able to fight for their rights and interests in order to understand the business goals and objectives fit with its own, in order to make career decisions, government departments can be achieved on the macroeconomic run trend to master, and as a basis for formulating economic development plans and implementation control policies in order to achieve social and economic orderly operation. false accounting information may mask potential problems in the economy, government departments as a basis if this is bound to disrupt the normal economic environment, but also on the serious impact of social and economic order.
Finally, the damage to the market economic order, is not conducive to the construction of credit system of accounting integrity is an important part of social integrity, if false accounting information would seriously reduce economic efficiency, causing damage to the market economic order, in addition, deteriorating social climate will therefore increase the social and economic crisis, the potential for economic development in the community caused great negative impact. Links to free download http://eng.hi138.com
Fourth, the audit of the financial statements fraud measures
First, the auditors should abide by professional ethics, to remain objective skepticism actively identify the warning signals, including management level warning signal: executives with fraud or other violations of laws and regulations, bad record, will frequently reorganized, the high turnover rate will high, personal wealth and corporate performance and stock price closely, is expected to achieve earnings or other financial projections pressure on unrealistic financial goal made a commitment to performance-based remuneration in the financial decision-making subject to debt covenants, and the violation costly and overly keen to maintain or improve the stock price, tax planning, major decisions are made by a small number of key people around, and often go beyond the decision-making procedures. relationship level warning signal: loans or other debt covenants, restrictions on the business or financial decisions constitute major problems, abnormal relationship between banks, senior bank executives or board with the organizers close contacts existed in the past, frequent replacement of financial services institutions or commercial credit deterioration, in the absence of justifiable business reasons circumstances will the primary account, subsidiaries or business set up in some overseas tax havens, borrowed from financial institutions and high-risk loans to mortgages and other critical assets. organizational structure and industry level warning signal: the organization is too complex, enterprises are mainly subsidiaries or branches geographically widespread, while the lack of effective communication and internal control mechanisms, internal audit institutions play an influential role in the lack of or inability to members of the Board or the Executive Director primarily by internal gray directors too passive role of the Board of Directors, subject to the corporate executives layer Did not have an audit committee or its members lack independence or competence, etc.
financial results and operational level warning signal: the company has grown rapidly, expanding too fast, surprisingly good performance, corporate profits over-reliance on non-core business, excessive debt, radical pay system, assets, liabilities, income and expenses are measured involves subjective judgment difficult or uncertain confirmed matters.
Combining these warning signals captured doubt, the auditor may listen to the management unit introduced the basic situation, listen to the customer as well as industrial and commercial exchanges, banking, taxation and other departments of the enterprise view and evaluation, listening to the workers of the enterprise or related personnel evaluation to understand the situation and found that doubt. also by some of the information already in the possession, evidence and other clues to the use of the unit being audited parties, witnesses and other relevant personnel to oral questions, learn verify the situation, in order to obtain information about the new evidence and clues. observation is one of the methods used during the audit evidence is the unit being audited business premises, physical assets and related business and its internal implementation inspected such behavior in the audit work in practice, some auditors utilize observation Evidence Act, in a short time get a lot of first-hand information and evidence, while others are ineffective, because the audit observations did not really grasp the way the kernel. still need to analyze financial information primarily between the constituent elements of financial information and relevant non- Financial information between the abnormal or difficult convincing program or relationships, including transactions or events occur or location exceptions, executors exception, procedures, policies or methods abnormalities, etc. In addition, the transaction also includes excessive scale big or too small, the amount is too high or too low, the frequency is too high or too low, the result of too severe or too mild in reviewing various bills, the auditor should first start with the internal control, inspection notes purchased, requisitioned, destruction, and a series of acts of preservation stubs, see control whether sound, effective, stub is complete, and the use of judgment or a statistical sampling method, drawn from a number of stub to see if all credited. can also be obtained from the receipt of the audited entity associated survey as evidence request to check the corresponding stub as a breakthrough, check if there are costs not accounted problem in the audit should be no tampering with any particular attention to whether the original data collection receipt of order number to use, the use of illegal bills, acts of forgery economic matters, from the data, accounts processing and payment receipt, economic exchanges, the use of handwriting and other non-normal phenomena, to identify problems and timely find clues.
The distribution and supervision project team members, consider take on important operational responsibilities of the project team members have the knowledge, skills and abilities and to consider material misstatement due to fraud risk assessment. Significant risk to consider if it is modified or additional audit procedures The evaluation of the audited entity to accounting policies (subjective measurement and complex transactions involving the selection and application of accounting policies, whether it may indicate that the profit for the financial management through the manipulation of information to make false reports in the choice of the nature of audit procedures, timing and scope Note that increasing the unpredictability of the audit process in the management layer to communicate with the management layer has been informed Note that if management's violations of the law, the CPA can no longer communicate with them but need to get the management has informed the violations of the law relating to audit evidence If you need to communicate according to the judgment that the act was intentional violation of the law and significant, CPA management layer should be informed as soon as possible if the suspected violations of the law involved in the management and governance layer, CPAs should be audited entity to the audit committee or board of supervisors, etc. reported a higher level. Finally, the CPA should be based on whether the violations of the law have a significant impact on the financial statements and whether they make a proper reflection, careful audit report. V.
China is still in the initial stage of market economy, financial statement fraud is not only an economic phenomenon, but also highlight the deep moral conviction level, so the financial statements fraud governance is a system work, not only requires companies also need social and government Trinity regulatory system to coordinate the various departments and only take comprehensive measures to control, to make China's economic development to the next level, and create a good environment. (Author: Capital University of Economics
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