Empirical Analysis of Financial Fraud Identification in Chinese Listed Companies

Abstract

As the carrier of accounting information, financial report reflects a company’s financial status, operation and cash flow, and receives abundant attention from the beneficial bodies like the shareholder, creditor, and governmental department etc. However, in China, from the establishment of capital market, financial report fraud is rampant. The financial crisis last year further aggravated the situation. It severely impairs sound development of stock market. The article starts from the theoretical basis for financial report analysis, analyzes the current situation of financial report fraud in listed companies and the harms, elaborates on common methods of fraud and identification methods from the aspect of financial report and annotations, analyzes the cause of fraud in the listed companies based on common risk factors and individual risk factors, proposes prevention measures, and explains how to prevent financial report fraud taking Kelon Electric case as example.