Wanfushengke Financial Fraud Case Analysis Essay
In the ordinary daily life, we all more or less come into contact with the dissertation, right? The dissertation is of great significance to all the educators and to the improvement of the overall understanding of human beings. So, how to go about writing a dissertation? The following is a case study paper on the financial fraud of Wanfu Shengke that I have compiled for you, for reference only, let's take a look at it.
Wanfushengke financial counterfeiting case analysis paper Part 1
Abstract In recent years, China's listed companies financial counterfeiting cases have been repeated, seriously harming the interests of small and medium-sized shareholders, and undermining the order of the capital market, at the same time, once discovered, will greatly reduce the value of the company. And the most fundamental reason for financial counterfeiting is the existence of defects in corporate governance. In view of this, the article from the perspective of corporate governance, to Wanfu Shengke GEM counterfeiting first as an example of its counterfeiting means and counterfeiting of the deep-seated reasons for analysis, and then put forward to prevent the listed companies financial counterfeiting countermeasures.
Keywords financial fraud; corporate governance; Wanfu Shengke
CCTS: F275 Literature Identification Number: A Article Number: 1004-5937(2014)25-0064-03
I. Introduction
With the gradual development of the market economy and the increasing maturity of the capital market, the tendency of capital has gradually emerged. In recent years, China's listed companies appeared a series of financial fraud case, such as the previous Shenzhen main board listed companies "Yin Guangxia" fraud case, and small and medium-sized listed companies "Greenland" fraud case. These cases have caused investors to suffer huge losses and undermined their trust in listed companies and China's capital market. Although China's supervision of listed companies has been strengthened, but there are still some companies driven by the interests of the use of various methods to carry out financial counterfeiting, in August 2012, the occurrence of Wanfu Shengke financial counterfeiting case become the first GEM counterfeiting stocks.
Background of the case
The predecessor of Wanfushengke (Hunan) Agricultural Development Co., Ltd. was founded in 2003 as Hunan Taoyuan Xianglu Wanfu Limited Liability Company, and was listed on the GEM board of the Shenzhen Stock Exchange on September 27, 2011, with the stock code of 300268 and the abbreviation of "Wanfushengke". "Wanfu Shengke". It is mainly engaged in the production and sales of rice crystalline glucose, rice high protein, high maltose syrup and other starch sugar series products, and is a circular economy enterprise for the comprehensive utilization of by-products of rice deep processing.
In less than a year on the market, Wanfu Shengke was exposed to financial fraud. In the 2012 semi-annual report, the company inflated operating income of 188 million yuan, inflated operating costs of 146 million yuan, inflated net profit of 40,231,600 yuan, the amount of the aforementioned data is large, and led to the company's 2012 first half of the financial report of the direction of the profit and loss changes, the plot is serious. Therefore, WFSK was investigated by Hunan Provincial Bureau of Securities Regulatory Commission, and on November 22, 2012, WFSK was publicly condemned by Shenzhen Stock Exchange. With the further development of the case, the counterfeiting behavior of Wanfu Shengke before listing also surfaced. According to the public condemnation made by the Shenzhen Stock Exchange on March 15, 2013 on Wanfu Shengke, there were false records of financial data of the company during the period of 2008-2011, and the cumulative inflated revenue was about 74,000,000 yuan, inflated operating profit was about 18,000,000 yuan, and inflated net profit was about 16,000,000 yuan. Among them, in 2011, the company fictitious operating income of 28,000,000 yuan, inflated operating profit of 65,413,600 yuan, inflated net profit attributable to shareholders of the listed company of 59,126,900 yuan, respectively, accounting for the company has disclosed the 2011 financial report in the three financial data amount of 50.63%, 110.67% and 98.11%. After adjusting the above inflated data, the amount of business revenue, business profit and net profit attributable to shareholders of the listed company in 2011 were 273,000,000 Yuan, -6,351,100 Yuan and 1,441,700 Yuan respectively, which were materially different from the relevant financial data disclosed by the Company. As of May 10, 2013, Wanfushengke's financial fraud case has a final result, the Securities and Futures Commission of Wanfushengke suspected of fraudulent issuance and related intermediary violations of the law case was formally notified, and the relevant personnel have been punished.
Three, Wanfushengke financial counterfeiting means briefly analyzed
Generally, the result of the company's financial counterfeiting is a false increase in operating income and profits. According to the three financial statements on the accounting relationship, the increase in operating income and profit in the income statement is reflected in the balance sheet, is the increase in assets. According to Wanfushengke's announcement, its specific means of counterfeiting are mainly false increase in accounts receivable, false increase in prepaid accounts, false increase in construction work in progress.
(A) inflated accounts receivable
According to Wanfu Shengke's "Announcement on Supplementary Disclosure of Important Information and Correction of 2012 Interim Report" (hereinafter referred to as the "Announcement"), the net accounts receivable in the first half of 2012 was corrected from 128.3 million yuan to 412.5 million yuan, which was an inflated increase of nearly 8.76 million yuan. In addition, the report showed that. The top five customers have changed a lot, as shown in Table 1, the top five customers of accounts receivable before the correction did not appear in the list of the top five after the correction, and, the total accounts receivable of the top five customers decreased from 5.12 million yuan to 1.64 million yuan, which indicates that there are serious falsification of its accounts receivable, including forged sales contracts, virtual sales business, and so on.
(ii) False increase of prepayment
Prepayment refers to a claim that occurs when the buyer and seller agree to pay a part of the purchase price to the supplier in advance, but in fact, not all of these prepayments of WFSK are linked to real transactions. Wanfushengke's 2011 annual report showed that the prepayment was 107 million yuan, while the actual corrected amount was 12,792,900 yuan, which inflated the prepayment by 10.7 million yuan. According to the Announcement, the corrected prepayment at the end of June 2012 was 145,695,500 yuan, while the actual amount was 101,007,200 yuan, an inflated increase of 44,688,300 yuan. Through false transactions, WFSL paid the company's funds to grain brokers and farmers. And in fact, on the one hand, most of the funds were transferred to the bank accounts under their control, and then the funds were recovered by way of sales returns; on the other hand, with the further development of the project, the prepaid accounts could be shifted to the construction-in-progress, thus achieving the purpose of inflating the construction-in-progress.
(C) Inflated construction in progress
Through the construction in progress to achieve inflated revenue and profits is the most clever means of Wanfushengke. Because the construction work in progress is still under construction, it is hidden, unlike accounts receivable, which is easy to be detected. The Announcement shows that at the end of June 2012, the construction in progress was inflated by 80.36 million yuan. Among them, the projects with large amount of inflated projects are shown in Table 2. Heating plant renovation project, starch expansion project and sewage treatment project three projects total **** inflated by 75 million yuan.
Four, Wanfu Shengke financial fraud reason analysis
Wanfu Shengke financial fraud occurs to show that there are serious flaws in its corporate governance structure. The governance structure of the company is the division of power within the company, is the shareholders' general meeting, the board of directors, the supervisory board, "separation of powers" results, each of the three in its own way, mutual restraint. However, in China's listed companies, the phenomenon of one-share dominance is more serious, the major shareholders control the board of directors and managers, at the same time, the independent directors and the audit committee of the internal oversight is inhibited, which leads to the major shareholders to use the right of control to encroach on the interests of small and medium-sized shareholders.
(a) Highly concentrated shareholding structure
Wanfushengke is a typical one-share sole proprietorship large enterprise. According to the 2012 annual report, Gong Yongfu and Yang Ronghua hold 29.99% of the company's shares respectively, and they are husband and wife, so **** holds 59.98% of the company's shares. This highly concentrated shareholding structure makes the actual control of the company is Gong Yongfu and his wife. In the absence of equity checks and balances, the actual controllers will override the internal controls, and the company's major decisions will be made entirely according to their will, rendering the internal control system null and void, thus realizing the purpose of manipulating profits and privatizing interests. Regarding the false records and material omissions in Wanfu Shengke's 2012 semi-annual report, Wanfu Shengke also believes that it is because of the laxity of the internal control and that the internal control system has not been well implemented. In addition, the company's de facto controller Gong Yongfu is both chairman and general manager. This "two powers in one" corporate governance structure undermines the mechanism of monitoring and being monitored by the board of directors and the managerial level. The chairman of the board (the manager) is in control of the company's daily business operations, which is actually the manager's self-supervision, and this phenomenon can easily lead to financial fraud.
(ii) Independent directors are not "independent"
The independence of independent directors determines the efficiency of the board of directors' supervision, therefore, China launched the independent director system in 2001. Since independent directors have stronger independence than ordinary directors, the independence of the board of directors of a company is guaranteed after the implementation of the independent director system. However, most of the independent directors in China are just a formality, and most of them are only part-time and will not put most of their time and energy into the affairs of the company at all. According to the 2011 annual report of Wanfushengke, the three independent directors participated in the six board meetings held by the company in 2011, and did not express any independent opinion on the financial falsification behavior of Wanfushengke. Zou Lijuan, as the only professional accountant among the three independent directors, has a certified public accountant qualification certificate and richer practical experience, and it is impossible to know nothing about the company's counterfeiting behavior, which indicates that it has lost its due independence or has not fulfilled its supervisory duties. The other two independent directors, Shan Yang and Cheng Yunhui, are experts in the field of agriculture and biology respectively, indicating that by choosing industry experts as independent directors, WFSC is treating the independent directors more as consultants rather than supervisors. Therefore, the independent directors of Wanfushengke did not fulfill their independence and failed to play the role of check and balance the board of directors and protect the interests of small and medium-sized investors.
(C) Audit Committee Failure
The audit committee is mostly composed of independent directors, and its members must have professional knowledge of accounting and auditing. Therefore, the audit committee, as an important internal control mechanism, has a strong supervisory function over the company's internal accounting behaviors and disclosure statements. However, when a serious financial fraud occurred in Wanfushengke, the audit committee still considered that there were no significant deficiencies in the design and implementation of the company's internal control and that the company's internal control self-evaluation report was consistent with the design and implementation of the company's internal control. Obviously, the company's internal audit did not play a normal role, and the audit committee did not carry out effective supervision of the disclosure of significant information, so it can be said that the function of the audit committee of Wanfu Shengke is basically in a state of absence.
Five, Wanfushengke financial fraud revelation
According to the above analysis, Wanfushengke financial fraud is attributed to the existence of defects in its corporate governance, the failure of the internal control system, for this reason, this paper from the perspective of corporate governance, the following aspects of the proposal to improve the efficiency of corporate governance, to prevent the occurrence of financial fraud. The occurrence of financial fraud.
(a) Optimize the shareholding structure, reduce the proportion of shares held by major shareholders
The more concentrated the shareholding means that the controlling shareholders of the company's accounting behavior the stronger the constraints. In this case, the controlling shareholders are subject to a lower binding force and may make false disclosure of accounting information for the sake of their own self-interest, thus harming the interests of small and medium-sized shareholders. To this end, we can gradually reduce the proportion of shares held by major shareholders, increase the proportion of institutional shareholding, public shareholding, realize the diversification of investment subjects, equity dispersion, the situation of mutual checks and balances of major shareholders, the establishment of interested shareholders voting rights exclusion system, so as to prevent the abuse of voting rights by major shareholders.
(B) Improve the system of independent directors and audit committee
As an important governance mechanism of the company, the independence of independent directors and audit committee is crucial. If the controlling shareholders have the power to appoint and remove directors, the independence of independent directors will be undermined, and the functions of the audit committee will not be well utilized. Therefore, in order to give full play to the role of independent directors and the audit committee, a mandatory voting recusal system can be implemented for controlling shareholders and the directors they send, with small and medium-sized shareholders proposing their own candidates for independent directors to safeguard the interests of small and medium-sized shareholders. In addition, the operational efficiency of independent directors and audit committees should be strengthened supervision to avoid formalism.
(C) Separation of the chairman and general manager
In the case of a highly concentrated shareholding, if the chairman and general manager are the same person, the interests of the company's de facto controllers and management are highly aligned, and the management's management decisions are made for its own benefit. The corporate governance model in which the chairman and the general manager are combined makes the decisions free from dissent. In this case, the managerial layer is prone to breeding the risk of accounting fraud, thus encroaching on the interests of the company and the small and medium-sized shareholders. Therefore, it is recommended that the chairman and general manager be mutually independent . . two people, so as to realize the internal control system of incompatible positions separated from each other.
References
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Wanfushengke Financial Fraud Case Analysis Essay Part 2I. Background
Wanfushengke Co. On September 14, 2012, the company announced that it was suspected of violating relevant securities laws and regulations and was under investigation by the Hunan Supervision Bureau of the Securities and Futures Commission (SFC). On September 18, Wanfu Shengke announced that the SFC had decided to investigate the company and suspended trading of its shares from the next day. On October 25, Wanfu Shengke issued the "Announcement on Supplementary Disclosure of Important Information and Correction of 2012 Interim Report" (the "Supplementary Correction Announcement"), admitting that it had falsely increased its operating revenue by RMB188 million, operating cost by RMB146 million and net profit by RMB40,231.6 million in the 2012 half-year report, which caused the company's total profit for the first half of 2012 to change from a profit of RMB28,740.1 million to a profit of RMB20,740.1 million. Profit of 28.740 million yuan to a loss of 11.737 million yuan, a decrease of 138.88%, in addition to not disclosing the company's first half of the suspension of production.On March 2, 2013, Wanfu Shengke released a self-examination announcement, admitting financial fraud. So far, Wanfushengke has become the GEM's first stock of counterfeiting.
Two, fraud means analysis
In general, the results of corporate financial fraud is the false increase in operating income and profits. According to the three financial statements on the accounting relationship, the increase in operating income and profit in the income statement is reflected in the balance sheet, is the increase in assets. According to Wanfushengke's announcement, its specific means of counterfeiting are the false increase of accounts receivable, the false increase of construction in progress, the false increase of prepaid accounts, and so on.
(a) Inflated operating income
The main business items of Wanfu Shengke are the sale of rice, maltose and many other agricultural and sideline products. Falsify the actual sales revenue of the vast majority of products, compared to the normal selling price of more than four or five times, and the resulting falsified sales revenue is more than one hundred times the real sales revenue, and even some products do not have actual sales, the existence of sales behavior out of thin air. Syrup's actual operating income of 20,317,400 yuan, false report said operating income of 122,262,200 yuan, a false increase of 101,943,800 yuan; maltodextrin operating income of $ 0, false report of 11,238,900 yuan, a false increase of 11,238,900 yuan; the actual operating income of the product was 82,314,400 yuan, a false report of 269,760,200 yuan , a false increase of 187.4458 million yuan.
A few days ago, Wanfu Shengke released its 2012 annual report, the company lost 3.41 million yuan last year. Particularly strange is that, despite the first half of last year, the production line of a large area of production, the second half of the year and suffered a crisis of counterfeiting, Wanfushengke full year but realized 296 million yuan in revenue, an increase of 8.39%. "In the case of counterfeiting east, sales greatly affected, Wanfu Shengke also realized 214 million yuan of revenue in the second half of last year, can not let people doubt the authenticity of its performance." Due to the Wanfushengke falsification leakage, bringing changes in the upstream and downstream industry chain: upstream suppliers take the opportunity to raise prices, making the company's operating costs increased; downstream customers to reduce the number of purchases of Wanfushengke products, or require the company to reduce the price of supply, the company's product sales have been a significant decline.
In addition, before the correction of accounts receivable in the amount of the top five in the correction of the three did not appear, and the correction of the top five accounts receivable amounted to a total of 71,727,800 yuan, than the actual situation of 27,604,200 yuan increased by 44,123,700 yuan. It shows that there is serious falsification of accounts receivable. According to the investigation, Wanfushengke in the sales contract disclosed in the two contracts signed with the Huayuan Cereals and Oil Business Department, and the three contracts signed with the silly cow food factory by the boss of the two enterprises and the boss's wife said that do not exist; and Yide Cereals and oil trading line owner Huang Deyi and Wanfushengke controlling shareholders for the kinship, which can be seen in the enterprise there is a forgery of the sales contract, the virtual sales of the business and other behaviors.
(B) inflated prepayments
Accounts payable and prepayments include not only project payments, but also payments arising from day-to-day operations. However, the accounts payable of HUFSC is very small, only 7.63 million yuan at the end of the first half of 2012, which is negligible. As for prepaid accounts, except for the end of 2011, the amount has also been small, at the end of 2011, Wanfu Shengke's prepaid accounts increased by 449.44% compared with the end of the previous year, to which the company's explanation is that "the main reason is that the company's fund-raising investment projects are in full swing, increasing the amount of prepaid equipment." The question is, since the end of the first half of the prepaid project should be reduced, the statement on the prepaid accounts but why also increased a lot? Some people explain that the daily business activities of the prepayment of many purchases. However, from the historical data, the day-to-day business activities of Wanfu Shengke can not generate too much prepaid accounts, from the end of the first half of 2011 prepaid accounts are also not high, there is no seasonal factors leading to the surge in prepaid accounts. In fact, according to the prospectus, at the end of the first half of 2011, the prepaid accounts in the prepaid brokers (raw materials) purchases only 9.55 million yuan.
(C) Inflating revenues and profits
The purpose of transferring profits or inflating profits is achieved by conducting related-party transactions, utilizing fictitious sales by related parties, and through sales pricing differences. In the case of Wanfushengke's financial fraud, there are obvious related-party transactions to fake behavior. The report shows that Hunan Province, silly cow food factory, Huaihua small yaya food, contribute to the income of about 13 million yuan, but after the change of the ` report, these two companies have disappeared from the list of the former top five customers: Hunan qidong jiaomei food and jinshi city, zhongyi confectionery company contributed to the income of 14,156,100 yuan and 13,419,500 yuan, respectively, and after the change of the change of the 2,228,000 yuan and 118.73 million yuan.
WFSL set up a large number of virtual supplier accounts externally, which were owned by some real grain brokers but actually controlled by WFSL. Through the form of prepayment to transfer their own funds to these accounts, and then withdraw cash from them or other ways to transfer back, constituting a sales return, resulting in an increase in the size of the sales, thus inflating the operating profit.
Wanfushengke private carving customer fake official seal, fabricate sales of fake contracts, false sales invoices, the preparation of bank documents, false warehouse receipts and a series of counterfeiting process with the cooperation, so that the inflated sales revenue looks reasonable, and even to the tax department to pay taxes for the false income.
The false increase in profit and income needs to correspond to the "assets". Wanfushengke in the process of counterfeiting chose to inflate the "construction in progress" and "prepaid accounts" project, its fund-raising construction projects are still under construction, reduce the risk of exposure, as for the prepaid accounts, whether the actual occurrence of the verification, perhaps in fact, will be the funds The first time I've seen this, I've seen it in the past.
Three, Wanfu Shengke financial fraud signal analysis
Half-yearly report, the total operating income of 23.22 million yuan, an increase of 16.23% over the same period last year, while the operating profit as well as the total profit of 25.54 million yuan and 28.74 million yuan, respectively, compared with the same period last year, a decrease of -15.34% and -16%. And the 2011 annual report, the enterprise's total operating income than the 2010 annual growth of 27.60%, operating profit growth of 10.62%, total profit growth of 9.11%. The same year, operating profit and total profit fluctuations are very large, attracting suspicion.
There are a large number of prepaid accounts, are "prepaid engineering, equipment, engineering is still under construction", and the corresponding customers are individuals, can not be verified.
The amount of construction projects in progress has increased a lot compared to the end of 2011, but the degree of completion in half a year is very low. The degree of completion of the heating plant renovation project is only 50%, the degree of completion of the sewage treatment project is only 2%, in addition, from the prospectus disclosed in the June 2011 construction in progress, there is no sewage treatment project this project. Then, the authenticity of this project in the half-yearly report is very doubtful. Starch sugar expansion project, 2012 half-yearly report compared to the 2011 annual report in the amount of input increased 12.5 times, the progress of the project instead of 90% to 30%, and in the 2012 annual report did not mention the starch sugar expansion project, whether the project exists or has been completed is not known.
Fourth, the financial fraud revelation
Financial fraud cases occur frequently, have to pay attention. More importantly, financial fraud is not a moment of quick success, a long time in the tent will inevitably have traces to follow, we must reflect on how to make full use of the public information of the listed companies as well as risk-oriented auditing model, early discovery of listed companies in the financial fraud. In the case of Wanfu Shengke, a large number of bank vouchers were forged, and there is a necessary relationship between the fact that the problem was not exposed before and the laxity in reviewing the relevant vouchers and bills. Therefore, the audit should pay attention to the review of the original documents of the relevant enterprises. Wanfu Shengke belongs to the high-tech industry, and is a local performance enterprise, its industry background, listing procedures, financial support, technology research and development are key audit breakthroughs. It may be necessary to strengthen the field visit to obtain direct evidence, for the sales-oriented company, the connection between it and its customers is also quite close. Therefore, through field visits to investigate the authenticity of its various businesses, you can further prevent and detect fraudulent situations.
References:
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