Abstract: With the rapid development of China's economy and the continuous maturity of the securities market, in order to pursue higher profits, the problem of profit manipulation follows. So, under what background did profit manipulation happen? How to identify profit manipulation? What measures can effectively curb this behavior? This paper expounds the above problems accordingly.

Keywords: profit manipulation; Reason; Performance; Countermeasures

Profit manipulation generally refers to the behavior of enterprises to artificially adjust profits through various means for a certain purpose. This behavior distorts the profitability of enterprises, hides the problems in enterprise management, affects the normal social and economic order, and is extremely harmful. Therefore, this paper analyzes the reasons and means of enterprise profit manipulation, and puts forward specific countermeasures and measures to curb profit manipulation.

First, the reasons for profit manipulation

(A) business leaders pursue political achievements and improve corporate profits.

Because the assessment of business performance is generally based on certain financial indicators, profit is often the most important financial indicator. For example, the planned completion of profit, return on investment and sales profit rate are all important assessment indicators of business performance. Business performance evaluation involves the evaluation of the management performance of factory directors and managers, and affects their promotion, bonuses and benefits. Therefore, for the sake of performance, enterprises will inevitably manipulate profits.

(B) the enterprise pursues a good external image and inflated profits.

Under the market economy system, especially after China's entry into WTO, banks and other financial institutions are reluctant to lend to loss-making enterprises and enterprises with insufficient reputation in most cases for the need of minimizing risks. Capital is the necessary condition for enterprises to maintain simple reproduction and expand reproduction, and it also determines whether enterprises can occupy a favorable position in the fierce market competition. In China, enterprises are generally short of funds. In order to obtain credit funds from banks and other financial institutions, some enterprises maintain their credit in business operations and inflated profits.

(3) Listed companies exaggerate or even fabricate false profits for their own profits or the interests of major shareholders.

In China, listing indicators have always been a scarce resource, and its shell resources are priceless. Driven by interests, profit manipulation occurs from time to time, and its motivation is nothing more than the following:

1. is eligible to issue shares. When an enterprise issues for the first time, according to the Company Law and other relevant laws and regulations, the enterprise must be profitable continuously and have outstanding business performance in the last three years before it can pass the examination and approval of the CSRC. Some companies whose performance can't meet the requirements have to package their profits to qualify for listing.

2. To raise the issuance and allotment price. The issue price and allotment price directly determine the amount of funds raised when the amount of issuance and allotment is fixed, so some enterprises take risks and raise the issue price and allotment price of earnings per share (the increase of earnings per share can only be solved by increasing profits).

3. Avoid delisting stocks. According to the regulations, listed companies have suffered losses for three consecutive years, and the CSRC will suspend their stock trading and eliminate the losses within a time limit. If the losses are not eliminated within the time limit, its shares will be delisted and its trading in this exchange will be terminated. In order to maintain the listing qualification, listed companies will manipulate profits to a certain extent.

(4) Concealing profits and evading income tax.

Income tax is based on accounting profit, which is adjusted to taxable income and multiplied by appropriate tax rate. Some enterprises will hide profits in order to evade taxes and delay taxes. However, some enterprises, especially listed companies, pay more income tax in order to maintain their social image and raise enough funds, and this part of income tax is often returned to listed companies in the form of tax refund by local governments.

Second, the specific performance of profit manipulation means

(1) Adjusting the total profit through false sales, confirming sales in advance or intentionally expanding the scope of credit sales.

This kind of profit manipulation phenomenon is particularly obvious at the end of the year. Often, when the enterprise fails to reach the established profit target at the end of the year, it adopts false sales or confirms sales in advance, so as to achieve the established profit target. This kind of sales can't get cash, so when these phenomena occur in enterprises, the amount of accounts receivable will increase, which is reflected in financial indicators. On the one hand, the proportion of accounts receivable in current assets will increase, on the other hand, it may also be reflected in the decrease of accounts receivable turnover rate. This kind of profit manipulation phenomenon is very common, there are two main ways:

1. Misuse accounting principles and classify non-sales income as sales income. The main means are: first, issuing VAT sales invoices to inflate income. That is to say, through the form of falsely issuing VAT invoices with relevant units, virtual purchase and sale business, falsely increasing income and profits, and then skillfully using the VAT deduction system. Issuing VAT invoices not only achieves the purpose of inflating income and profits, but also does not increase tax burden. The second is to use preferential policies for export commodities to falsely increase income. That is, using the condition that export goods enterprises can issue sales invoices on their own, they can carry out virtual export business to achieve the purpose of inflating income and profits.

2. By confusing the accounting period, the next sales income will be included in the current period, or the current sales income will be deferred for confirmation, so as to adjust the current profit. The purpose of this practice is mostly for enterprises to establish an external image of their own business growing year by year. For example, after the listing of Spark Company, it made a big fuss about the profit attribution period, and adjusted the sales revenue 1996 to1760,000 yuan, and the sales profit of 38 million yuan to 1997. 1997, the sales income was 226 million yuan, and the sales profit was 47 million yuan, which was also transferred to 1998, thus creating the illusion of stable profit for three consecutive years, and the profit rate of sales and net assets increased steadily.

(2) Use related party transactions to adjust profits.

Many listed companies in China are reorganized by state-owned enterprises, usually through partial reorganization of state-owned enterprises. Therefore, after the reorganization of the shareholding system, there will be complex related transactions between listed companies and their parent companies and their holding subsidiaries. Mainly in the following aspects:

1. Collect capital occupation fee from affiliated enterprises through capital borrowing. According to our laws and regulations, enterprises are not allowed to borrow from each other, but borrowing from each other is everywhere. This kind of capital borrowing behavior cannot be disclosed by listed companies in advance, and investors and relevant regulatory authorities cannot judge its rationality, which has caused some enterprises to use borrowed funds to adjust their profits to some extent.

2. Adjust the current profit by transferring expenses. There should be a clear division of expenses between the listed company and the parent company, but when the benefits of the listed company are not ideal, or they are not enough to achieve the prescribed profit targets, measures will be taken to share some expenses for the listed company, such as advertising fees, retiree fees and other management expenses, to adjust the profits of the listed company.

(3) Adjusting profits by artificially adjusting relevant accounts.

1. Adjust profits through the subject of "capital reserve". According to the provisions of the accounting system, the potential losses of enterprises should be included in the current profits and losses through the prescribed procedures and reflected in the profits. However, a considerable number of enterprises, especially listed companies that need a lot of profits, confirm property losses, bad debts, damaged fixed assets and inventories, prepaid expenses, etc. It should be assessed as impairment through asset appraisal, and the capital reserve should be directly reduced to achieve the purpose of inflating profits.

2. Adjust profits through the subjects of "other receivables" and "other payables". According to the current national accounting system, other receivables mainly account for the creditor's rights of non-purchase and sale activities of enterprises, while other payables mainly account for notes payable, accounts payable and other temporary collections. However, some enterprises violate the accounting content and adjust their profits through these two subjects. For example, other receivables are usually called "garbage bins", and a considerable part of them are expenses that should be settled but not settled. For various reasons, they suspended trading for a long time to hide their losses. Other payables are usually called "cornucopia", and a considerable part of them are actually empty and do not need to be paid, so as to hide income.

Third, the countermeasures to curb profit manipulation

(A) to speed up the pace of accounting standards and systems in line with international standards

The imperfection of accounting standards and systems has created "opportunities" for enterprises to manipulate accounting profits and whitewash business performance. To this end, we must further improve and standardize various standards and systems to curb profit manipulation.

1. The accounting treatment standards for asset appraisal further standardize whether the impairment of asset appraisal is written down as profit or loss or capital reserve, so as to prevent enterprises from adjusting their profits.

2. Ensure the continuity of accounting methods. For example, cost accounting and equity accounting should not be converted randomly by going back and forth, and stricter standards and boundaries should be set for the conversion of the two methods; Don't arbitrarily change the depreciation accrual method, especially in the years when the operating results of some enterprises have changed greatly, so as to prevent the profits from being adjusted accordingly.

(two) to strengthen the professional ethics education of accounting personnel, strengthen law enforcement supervision.

The credit crisis caused by the manipulation of profits by enterprises is essentially the result of the interweaving effect of corruption and the interests of various economic groups, and certified public accountants are only tools used by various interest groups. Therefore, in order to curb the manipulation of profits by enterprises, we must strengthen the professional ethics education of accountants and strengthen law enforcement. In order to achieve this goal, on the one hand, it is necessary to carry out moral education for accountants, on the other hand, it is necessary to purify the accounting industry environment. Enterprises that make false reports and whitewash profits in violation of regulations, accounting firms that help them whitewash profits and their relevant responsible personnel should be hell to pay in accordance with the provisions of laws and regulations, and those who violate the criminal law should go to hell, completely changing the current phenomenon that low illegal costs cannot compete with the temptation of powerful interests; Second, we should establish a civil compensation mechanism for enterprises and certified public accountants. Enterprises deliberately practise fraud, and registered accountants fail to discover major accounting fraud of listed companies due to malpractice for personal gain or gross negligence, and investors and creditors suffer losses, they shall bear civil liability for compensation and even criminal liability.