1. The correlation between the health of the corporate governance ecosystem and financial fraud
The "corporate governance ecosystem" refers to professionals such as investment bankers, certified public accountants, internal managers, accountants, and lawyers. The enterprise consists of "knowledge"-based. In other words, the participants in these markets should have the same concept of the market, the standards of good and bad markets, and they should have a set of terms and concepts that they understand each other. In a healthy corporate governance ecosystem, each link can perform its duties, abide by its own professional standards, maintain its independence, and check and balance each other. In this case, the probability of financial fraud is very small. On the contrary, in an unbalanced or unhealthy corporate governance ecosystem, some corporate managers* ignore accounting standards and relevant laws and regulations, instruct, instruct or force accountants to commit fraud and fabricate profits in order to whitewash the company's operating performance. Employees of some intermediary agencies, such as certified public accountants, lawyers, etc., for the sake of their own interests, disregard their own professional rules, and collude with company management who commit accounting fraud. For example, in order to achieve the purpose of stock listing, company management* formed a fraud assembly line with certified public accountants, lawyers, securities companies, etc. These professionals achieved a high degree of tacit understanding and cooperation in fraud. This shows that the "professional knowledge" composed of these professionals based on "knowledge * * identity" is not a set of rules and concepts of abiding by the law, being honest and trustworthy, and being diligent and responsible. The agency service concept of these professionals is not to act as guardians of the securities market, but to collude and commit fraud, thereby triggering an ecological crisis in corporate governance, causing significant economic losses to investors, especially small and medium-sized investors, and seriously disrupting the economic order of the capital market. Therefore, in an unbalanced or unhealthy corporate governance ecosystem, the probability of financial fraud is high.
2. Research on countermeasures to control the imbalance of "corporate governance ecology" and prevent financial fraud.
Judging from the current situation of China's securities market, companies with ecological imbalances in corporate governance are not just isolated phenomena. To effectively manage the ecological crisis of corporate governance and prevent the occurrence of financial fraud, the following measures must be taken:
2.1 Establish a complete organizational structure and form a good control mechanism.
In order for the securities market to operate normally and orderly, the securities market needs to establish a complete organizational structure. This organizational structure includes the main participants of the capital market (investors and issuers), service institutions (including securities companies, investment banks, accounting firms, law firms, evaluation agencies, news media, etc.), market organizations and self-regulation Institutions (including stock exchanges, securities industry associations), regulatory agencies (including China Securities Regulatory Commission, judicial agencies, law enforcement agencies, Ministry of Finance, People's Bank of China, etc.).
). After the organization is established, their relationships and roles must be clarified so that they have professional division of labor and can check and balance each other. Only such an organizational structure can maintain a good control mechanism and restrict financial fraud.
2.2 Strengthen the supervision of the securities market
2.2.1 Strengthen the self-discipline supervision of the securities market. Self-regulatory supervision of the securities market mainly refers to the supervision of stock exchanges. Stock exchanges are self-regulatory organizations responsible for the regulatory functions of maintaining market order and promoting market standards. At present, stock exchanges should focus on supervising the disclosure of accounting information by listed companies to ensure the authenticity of the accounting information disclosed by listed companies.
2.2.2 Strengthen the supervision of regulatory agencies. Supervision by regulatory agencies mainly refers to the supervision by the China Securities Regulatory Commission and relevant government departments such as the judiciary, executive agencies, and the Ministry of Finance. To strengthen supervision of regulatory agencies, we must start from the following two aspects:
① The position of the China Securities Regulatory Commission must be clear. At present, the correct positioning of the China Securities Regulatory Commission should be clarified. The position of the China Securities Regulatory Commission should be to be the real regulator of the securities market, not the owners, because it is not the supervisory unit of listed companies, nor is it the representative of the owners of state-owned shares. At present, our country has clearly stipulated that governments at all levels shall exercise ownership of state-owned assets (shares), thereby solving the problem of the absence of state-owned property rights. Such a positioning will allow the China Securities Regulatory Commission to distance itself from the suspicion of siding with the state and maintain its independence, thereby truly performing its regulatory functions. In order to effectively perform its supervisory functions, the China Securities Regulatory Commission also needs the cooperation and support of many other agencies in supervision.
(2) Government departments should increase penalties for financial fraud and increase the cost of fraud. Due to the lack of civil liability in my country's securities laws, in practice administrative penalties are generally used to resolve relevant illegal activities, without compensation to injured investors. In terms of criminal liability and administrative liability, penalties are also insufficient. Up to now, listed companies that have violated relevant regulations to defraud their listings, or even continued to defraud investors after listing, have been exposed many times, but not all of them have been dealt with in strict accordance with the relevant provisions of the Securities Law on administrative liability and criminal liability. Judging from the violations and penalties in the CPA industry, so far, the penalties imposed on CPAs and accounting firms have been limited to administrative penalties. No accountants or accounting firms have imposed civil penalties on investors who have suffered losses due to participation in fraud or gross negligence. compensation. As can be seen from the above, the repeated bans in the securities industry are not unrelated to the ineffective investigation and punishment by government departments and the low cost of fraud. Government regulatory authorities should intensify the investigation and punishment of fraud, increase the cost of fraud, and strictly enforce the law, so as to act as a deterrent and curb financial fraud. We can learn lessons from HealthSouth’s financial fraud case. In the United States, financial fraud cases such as Enron and WorldCom also gave rise to the Sarbanes-Oxley Act aimed at combating corporate crime. The bill provides that the chief executive officer and chief financial officer of a company, or corporate officers exercising similar authority, shall certify annual or quarterly statements submitted in writing to ensure that the financial statements truly and fairly reflect the financial condition and results of operations of the company. The bill provides that any person who knows in his certificate that a periodic report certified by him does not comply with the provisions of this bill shall be liable to a fine of up to $654.38 million or to imprisonment for a term of up to $654.380 years, or both; if The conduct is intentional and is punishable by a fine of up to $5 million or imprisonment of up to 20 years, or both. The severe penalties in this Bill are sufficient to deter offenders. On the one-year anniversary of the bill’s enactment, we found our first target—HealthSouth. In August 2002, Southern Healthcare's Chief Executive Officer Richard M. Scrushy and Chief Financial Officer William T. Owens sworn that the financial information they submitted to the SEC for the second quarter of 2002 was true and reliable, as required by the Sarbanes-Oxley Act. . After being sworn in, Owens couldn't sleep, stressed by the exposure of the fraud.
2.3 Improve the regulatory system for the CPA industry
Judging from the major fraud scandals in the United States and China, the lack of independence of CPAs and collusion with fake companies are major features of financial fraud cases .
Only through integrity education can participants and regulators in the securities market establish professional ethics. Integrity education should be comprehensive. Not only CPAs need integrity education, but also securities market regulators such as lawyers, securities analysts, investment banks, credit rating agencies, securities market participants, government officials, regulatory agencies and news media. Only by realizing the * * * complementation between the two ecologies can the large "ecology" of corporate governance be in a healthy and balanced state.
In addition, listed companies should also improve their corporate governance structure, clarify the respective responsibilities of the board of directors and the board of supervisors, form a checks and balances mechanism, introduce an independent director system, and strengthen supervision of the company's financial affairs. Companies should establish and improve internal control systems to prevent fraud and false accounting. By taking the above measures, the status of the corporate governance ecosystem will be significantly improved, and a restraint mechanism to prevent financial fraud will be truly established, thereby eliminating financial fraud.
Reference materials:
1. Li Shuguang. The ecological crisis of corporate governance[J]. Finance, 2002.6.
2. Du Xingqiang. A brief discussion on the attitude and countermeasures of the management of listed companies in my country towards the formulation of accounting standards [J]. Accounting Research, 2003.7.
3. Ge Jiashu, Huang Shizhong. Reflections on the Enron Incident—Analysis of Enron's Accounting Audit [J]. Accounting Research, 2002.2.
4. Huang Shizhong, Ye Fengying. Analysis of Financial Fraud Case of HealthSouth Company [J]. Accounting Research, 2003.6
5. Zhang Yan. A comparative study on fraud and supervision mechanisms of certified public accountants in China and the United States [J]. Journal of Sichuan University (Philosophy and Social Sciences Edition), 2003.4.