First, the connotation of financial fraud
Financial fraud refers to the intentional act of making use of the loopholes in accounting system and financial statements to carry out purposeful, premeditated and targeted financial fraud and deception, and bringing economic benefits to fraudsters by illegal means such as financial fraud, which eventually leads to injuries or losses to others or investors.
Second, the common means of financial fraud
(a) Income fraud
1. Management conceals fictitious income.
Fictitious income refers to the behavior of using improper means by other parties and then confirming the income in advance according to them, and this phenomenon is often more likely to occur among the management of enterprises. In order to achieve a certain performance, make the company's financial statements look good, and let investors believe in the company's profitability, so as to be able to raise funds smoothly. At the same time, in order to reduce the risk of delisting, the management of the company often takes some measures to fabricate income, such as tampering with the time of revenue recognition. For a typical example, Kunming Machine Tool Company adjusted the three incomes that should be confirmed from 20 14 to 20 15, making it 2065438.
2. Introduce the virtual income of third-party companies.
When inflating income, a common method for enterprises is to introduce third-party companies, also known as "bridge companies". Through this third-party company, enterprises can not only reflect income, but also avoid account offset when preparing consolidated financial statements. For example, in 2002, the financial fraud case of HPL Technology Company in the United States was exposed, and the after-sales payment of $3.2 million was fabricated. The company introduced Canon, a third-party company, and privately negotiated with Canon to let Canon buy software worth $3.2 million first, and then Canon sold the software to a subsidiary of Japan's HPL Technology Company for $4 million.
3. Fictitious sales revenue
Sales is the main factor affecting profits, so listed companies will cheat on sales in order to whitewash statements. The common methods are mainly fictitious sales contracts and fake invoices. From 20 15 to 20 16, Jiangsu Yabaite Technology Co., Ltd. fabricated overseas engineering projects, made false purchases and fabricated domestic export building materials trade. Only 20 15 inflated the current operating income by 580 million yuan and inflated the profit by 280 million yuan.
(2) Cost fraud
1. Capitalization of income and expenditure
Capitalization of income and expenditure refers to the use of accounting principles such as accrual basis, income-to-cost ratio, etc., through subjects such as prepaid expenses, organization expenses, projects under construction, and losses of current assets to be handled, which should have actually occurred, and form a large number of virtual assets as "reservoirs", and the expenses and losses that have occurred are not confirmed, underestimated or amortized in time. Among them, the most prominent is the capitalization of interest expenses. For example, Chongqing Titanium Dioxide Company capitalized the loan interest of 80.64 million yuan that should be included in the financial expenses and included it in the titanium dioxide project cost.
2. Adjust the aging of accounts receivable in disguise and make less provision for bad debts.
Less or no provision for bad debts is also a means for listed companies to adjust their profits. Some listed companies often achieve the purpose of financial fraud by adjusting the aging of accounts receivable. Generally speaking, accounts receivable that have not been recovered for more than three years are unlikely to be recovered, and accounts receivable that have not been recovered for more than five years are basically difficult to recover, so it is necessary to make full provision for bad debts. Therefore, in order to avoid the loss of profits caused by a large number of bad debt reserves, enterprises may join hands with buyers to falsely list current accounts receivable by borrowing and transferring funds, so as to reduce accounts receivable that have not been recovered for many years. In this way, from the book point of view, the current amount of accounts receivable is large, but the ending balance is small, so shareholders will mistakenly think that the turnover rate of accounts receivable is high, thus misleading investors' judgment.
3. The assets were not recorded in time, and the amortization expense was undercharged.
In addition to product price, amortization and accrual of expenses are the most influential factors on accounting earnings. The depreciation of fixed assets and the extension or shortening of amortization period of intangible assets can reduce or increase the current expenses. For listed companies, deferred expenses and deferred assets are actually incurred expenses, which should be amortized to related subjects within the prescribed time limit and included in the current profits and losses. However, some listed companies have little amortization or even no amortization for some purpose.
(3) Non-operating profit and loss manipulation profit
Non-operating gains and losses generally manipulate profits through government subsidies and gains and losses from the disposal of fixed assets. First of all, government subsidies can be directly included in profits and losses. The amount of this subsidy is usually huge, and the reason and time of income payment are uncertain. Many enterprises often manipulate and improve their net profit through the inflow of government subsidies in the year of delisting. Secondly, the disposal of fixed assets usually belongs to abnormal business activities. Enterprises can make provision for impairment in the profit-making year, then dispose of assets in the loss-making year, and turn back the excess provision for impairment in the previous year, thus forming profits and affecting profits, or dispose of a large number of fixed assets in the loss-making year in exchange for liquidity, which can also achieve the purpose of greatly improving profits.