Two Forms Of Distortion In Financial Statements

Looking at the financial statements of enterprises, excluding the factors of unintentional factors causing the distortion of reports, enterprises manipulate financial statements are also the process of earnings manipulation. I divide the unreal financial statements into two categories: one is pure inaccuracy, the other is technical inaccuracy. Pure misalignment is more serious, and this kind of misalignment is often disastrous; technical inaccuracy refers to manipulation manipulated by accounting methods, and it can also be understood that the problem of income, cost, expenses, assets and liabilities is not dealt with according to accounting standards.

　　 First, pure inaccuracy.

There are two cases of pure inaccuracy. One is the inaccuracy of assault, and the other is the systematic inaccuracy.

(1) blitz misalignment

Assault misalignment, with contingency and temporary purpose, often occurs at a specific time, for a specific event, and acts as a report made by a commanding person who makes up financial data that is beneficial to the enterprise itself. This form of means is relatively low-grade, or virtual reduction, inflated assets, or virtual reduction, inflated expenses, or virtual profit reduction, etc., but often the report is unbalanced (the sum of sub items is not equal to the total number), the accounts are not consistent, the relationship between the statements and the statements is not consistent, and the data in the front and back stages are not connected.

These situations often occur when reporting materials to government departments, exaggerating the sales revenue and asset size of enterprises, such as applying for government subsidies, submitting materials to relevant parties temporarily, such as submitting business plans to our investment companies and so on.

1, abnormal fluctuations in income

Because of the abrupt increase, enterprises often adjust their incomes, increase accounts receivable, or increase expenses, and increase accounts payable. Sometimes we can analyze such as: the sales revenue of enterprises during the current period increased by more than 30% over the past year, while the accounts receivable of enterprises also increased substantially, while the growth rate of accounts receivable was smaller. It is easy to see that the growth of the current income of the enterprises is not healthy. The decrease of the accounts receivable means the reduction of orders. And the large increase of accounts receivable with income may be a change in the sales credit policy of enterprises. Although we can not directly say that enterprises exist fraud, we should first doubt the existence of such a situation.

2, the relationship between Gou and Ji is not consistent.

The balance sheet shows that the long-term assets of the current period increased by 50 million yuan, while the cash flow statement purchased only 20 million yuan for the purchase of fixed assets, intangible assets and other long-term assets. We know that the difference should be an unpaid amount under normal circumstances. It should be reflected in the increase of accounts payable on the balance sheet. If accounts payable do not increase, then there is a suspicion that the relationship between the two tables is abnormal.

The data on the cash flow statement are closely related to the data in the balance sheet. Usually, the cash flow items of operating activities are linked to current assets and current liabilities; the cash flow items of investment activities are linked to long-term assets; there is also a special case of the financing activities cash flow terms and long-term liabilities and interests, for example, short-term loans in current liabilities are cash flows of financing activities.

3. Undistributed profits

The net profit on the profit and loss account is normally related: the undistributed profit at the end of the period - the undistributed profit at the beginning of the year = net profit. If the difference between the two amounts is large, excluding the special reasons such as dividends, there may be a false statement of profits and losses. Of course, there may be such a situation: doubling the income, assuming that the cost is not changed, and the profit will be doubled. If we do not increase the abnormal relationship between the above formulas, we will need more assets or less liabilities when the undistributed profits increase. Usually, the accounts receivable will increase. Undistributed profits on the balance sheet

(two) systematic inaccuracy

Systematic inaccuracy has a long term and special purpose. The difference between this situation and the shock misalignment is that the enterprise does not attack the counterfeit for the purpose of temporary purpose, but the behavior that the enterprise produces for the long term special purpose. Therefore, we should understand the psychology of the enterprise and understand the motive of the enterprise to gloss over the report forms.

With the popularity of computerized accounting, enterprises basically use financial software, while the workload is reduced while the probability of occurrence of low-grade errors is also greatly reduced. Therefore, enterprises often design multiple sets of electronic accounts for different users. Under such circumstances, the means of fraud are more subtle.

1, a comprehensive understanding of enterprises

(1) external environment of enterprises

From the investment point of view, the external environment of the enterprise contains more contents, such as macroeconomic situation, interest rate policy, exchange rate policy, government policy at the macro level, industry competition situation, industry development prospect, industry status and so on. The industry information may be more important when standing in line with the financial statement.

Among the many financial indicators, one of the most important indicators is the gross profit margin of the enterprise. The gross margin level of the enterprise has a great relationship with the industry status of the enterprise. Of course, if the deviation from the average level of the industry is very large, we should pay enough attention to it. But there is also a problem, which can be more difficult than the source of company data and industry data except from the listed companies and trade associations. Otherwise, there is no comparable data of Target Corp invested by us.

(2) internal non financial information

The scope of internal non-financial information is also broader, such as ownership structure, leadership, R & D team, etc. We know that the financial statement is a summary of the financial situation and business performance of a company. Its data come from the day-to-day business of an enterprise and its daily business is due to the financial statement. Obviously, if we do not seriously understand the daily business of the enterprise, we may deviate from the understanding and judgement of the financial statements.

Having learned the subjects corresponding to the above business links, it is also convenient for us to understand that enterprises need to synchronize fraud in each business chain when the system is counterfeiting.

2, loss of business insider

We sometimes encounter this situation: corporate reports show annual losses, but the registered capital of enterprises has increased to tens of millions of dollars from the initial establishment. Moreover, the increase in registered capital is the original shareholder's investment in monetary capital, not the introduction of strategic investors, or the registered capital of enterprises has not increased significantly, but the enterprises owe large shareholders' funds. Then, why should shareholders of enterprises, especially natural shareholders, continue to operate and even borrow large amounts of debt to the enterprises in the case of large losses and no profits?

Should we doubt whether enterprises really lose money? Usually, the answer is No. We know that in the early days of the establishment, in order to achieve rapid capital accumulation, we can say that there is basically no case of false accounts, property transfer and tax evasion.

(1) hidden income and multiple columns cost

Generally speaking, small businesses, especially family businesses, especially like to hide their incomes and multiple costs, usually enter the personal expenses directly from the business receipts that do not need to make invoices, but the relevant costs are still listed on the books, or when the acceptance of the products is done, the number of the acceptance products will be reduced, and the cost of the products will be increased.

(2) cost is a paradise for fraud.

The period expense account refers to the "management expenses", "sales expenses" and "financial expenses" on the profit and loss account. The basic accounting of the financial cost accounts is relatively simple. When the amount is large, the loan interest is basically, so the enterprise problem is basically on the other two subjects.

We often see the profit and loss statement of loss, which is basically a management fee or a sales expense subject matter is too large. For this reason, we should further refine the subjects, find out the detailed items of each subject and compare with the enterprises they know, such as:

(1) the company's wage expenses are relatively high, and the actual situation is that the number of employees in the enterprises is less, obviously less than that on the payroll, or the wages of employees are increased indirectly. Therefore, there are suspicion that enterprises exist in order to increase their expenses and evade taxes.

(2) the company has two cars on its books, but the fuel cost of the branches is very high; or Traffic expense Large or even a large number of taxi invoices, this situation is often the enterprise through normal invoices to the top part of the staff salaries, commission awards, external kickbacks and so on.

(3) enterprises have a lot of low value and easy to consume goods, such as furniture and household appliances. Are these low consumption true? Maybe it's true. It's just that the owners of the enterprise buy their own products at the expense of the company, which may not be real at all, but the old board of the enterprise is looking for tickets for the relationship, so that they can withdraw cash from the enterprises.

The above are just some cases. In addition to hiding revenue and forming small Treasuries outside the account, most of the owners of the business get cash from the enterprises through the way of invoice reimbursement.

From the above analysis, we find traces of fraud in enterprises, which can be negotiated with these enterprises to obtain more authentic business results.

　　 Two, technical inaccuracy.

Accounting fraud is commonly used in accounting.

(1) use income to confirm the time point.

Financial revenue recognition requires 5 conditions at the same time:

(1) enterprises have transferred all the main risks and rewards to the buyers.

(2) enterprises do not retain the right to continue management, which is usually associated with ownership, nor control the sale of goods.

(3) the amount of income can be measured reliably.

(4) the relevant economic benefits may flow into enterprises.

(5) the relevant costs that have occurred or will be measured can be reliably measured.

The above conditions are abstract and theoretical. In practice, enterprises usually take the following actions to determine the following 5 conditions:

1. Sales behavior has been completed.

Sales behavior has been completed in several aspects:

1. If it is a product or does not need to be installed, according to the contract goods sent to the customer designated place, after receipt of the customer's acceptance list, it will confirm the income (whether it can receive the acceptance list, and the requirements of different enterprises are different.

2. The products that need to be installed, however, do not constitute a major obstacle to the recognition of revenue (such as the installation of air conditioners). Generally, the revenue can be recognized after the goods are issued. If the installation constitutes an important part of the sales contract, then the confirmed revenue (such as boilers, installation and commissioning of major machinery) needs to be installed.

The above sales can be regarded as revenue realization regardless of whether the goods are received or not, and the enterprises usually achieve their purpose by way of confirming the revenue in advance or after deduction. For example, the enterprises should be able to record the products that have been shipped as the "goods issued" subject, and the time when the revenue is recognized. The current small and medium-sized enterprises are using the open ticket to confirm the revenue and do not open the ticket to confirm the revenue. Obviously, this is not in accordance with the accounting system. When we are doing the project, we will often hear the enterprises say what the tax requirements are, not the accounting standards, which is the current accounting situation of the small and medium-sized enterprises, accounting is for tax service, and accounting standards are not large for enterprises. Binding force 。 For those who need to confirm the revenue after installation, the income can be postponed even if the installation is not completed. All of us are saying that we have to postpone the recognition of revenue. Then, in what circumstances is the revenue recognized in advance?

Early recognition of revenue usually occurs in stages of revenue recognition. There is, of course, the need to confirm revenue after installation and confirm the income without installation. This is also an early recognition of revenue. The revenue is typically typical of rental income and naming income. For example, the Qingdao Airport VIP service center sells a VIP room naming right to CCB, a two year contract, which costs 1 million yuan a year, and a one-time payment. In this case, the Qingdao Airport VIP service received 2 million yuan, which should be recognized according to the two year's annual income of 1 million yuan. If a lump sum of 2 million yuan income is recognized at once, there is a problem of early recognition of income. In addition, let us look at a more typical case: the US Xerox Co is a leading supplier of office supplies in the world. In 2002, the company disclosed that in the past 5 years, the total revenue increased by $6 billion. How did the Xerox Co increase its revenue? The method was relatively simple. It took advantage of the earlier method of identifying revenue in advance. Xerox Co not only sold large copies, printing equipment, but also rented equipment. When it comes to rental equipment, we all understand that Xerox Co is the purpose of making use of rental revenue early recognition to achieve a false increase.

2. Confirm according to production schedule (completion level or project progress).

This way is easier to regulate income, but more difficult to control. For a simple reason, the enterprise's completion schedule is too professional. If the percentage of completed cost is accounted for the estimated total cost, that is, the percentage of completion method confirms revenue. First, the collection of completed cost can be made a big deal, and the total cost is expected to be a predictive value with greater operability. For example, in the shipbuilding industry, because of the longer production cycle, the confirmation of its revenue is based on the confirmation of the completion schedule, and the completion schedule is usually based on the various nodes of the ship, such as body welding, the engine on board, and the number of completion rates after the completion of the car body welding. Generally, the proportion of the total cost generated by the generator is determined, and the total proportion of estimated total cost is relatively large.

(two) using stock to issue valuation method.

Adjust the inventory and issue the valuation method, so as to adjust the selling cost and achieve the purpose of adjusting profits. At present, there are four ways of issuing valuation methods that are allowed by accounting standards: one weighted average method, the moving weighted average method, the individual valuation method and the FIFO method. In this case, we need to raise the method of "Hou Jinxian out" which has been clearly used by accounting standards. Some data also mention this method when the goods are sent out for valuation.

At present, the mobile weighted average method is commonly used in enterprises, and the individual pricing method is often used in the calculation of valuables, such as expensive watches. Although enterprises have chosen the pricing method, many enterprises do not use it in practice. For example, A enterprises sell 10 thousand sets of finished garments, the unit price calculated by the mobile weighted average method is 200 yuan, and the cost of carry over sale should be 2 million yuan, but the actual carry over cost is only 1 million 700 thousand yuan, thus inflating the pre tax profit of 300 thousand yuan, or the actual carry over cost 2 million 300 thousand yuan, thus reducing the pre tax profit 300 thousand yuan.

(three) depreciation.

We know that there are four factors that affect the depreciation of fixed assets, namely, the original value of fixed assets, residual value, depreciation years and depreciation methods.

1, the original value of fixed assets

After the completion of the fixed assets, unless the evidence shows that it has been impaired, its value will not generally change. Therefore, before the completion of the project, the value of the assets is usually inflated before completion, usually in the "in construction project". However, some enterprises have already completed the project, but have not yet transferred the "fixed assets" accounting. They will not increase depreciation or increase interest or capitalization of assets into assets value, so as to adjust the current profits.

Interest capitalization refers to borrowing for construction projects, and the interest incurred is included in the cost of the construction project. If the construction project is in a state of service, it does not mean the actual acceptance. Only if it can be used, then it should not continue to capitalization, and the corresponding interest expense should be included in the financial cost. At present, many enterprises continue to account for the cost of the construction project in the interest of performance, so we should make the necessary adjustment after the implementation of the specific amount.

R & D specific content, some enterprises are developing equipment, and the future is fixed assets, then we need to go to the site to see if the enterprises have been in kind. Is it successful? If it has been successful, but the R & D expenditure is still on the books, or it will continue to incur expenses, then there will be a time when the fixed assets will not be transferred to the fixed assets, and the profit will be increased without any mention of depreciation. Some enterprises are developing technology, so we can consult the enterprises when they can develop successfully, and what materials are available to support the R & D Progress of the enterprises. If the enterprises are only at the initial stage, whether they can succeed or not, or if the enterprises are sure to succeed, only the specific time can not be determined, then these expenditures should be cost oriented and reduce the profits of the enterprises. In addition to fixed assets, there is another subject "R & D expenditure", and some enterprises also call "development expenditure". If the enterprise has this subject, we should pay attention to it.

2. Salvage rate

Neither the accounting standards nor the tax law of the enterprise stipulate the ratio of the estimated net salvage value to the enterprise. The accountant merely says that the estimated net residual value of the fixed assets should be reasonably determined according to the nature and use of the fixed assets, and the tax law stipulates that once the net residual value of the fixed assets is determined, it is not allowed to change. This leaves a lot of room for the enterprise to operate, but the general enterprises remain in the 3%-5%. Although there is maneuverability, there is no rigid rule, so long as it is not a large ratio, we usually do not have to pay attention to it.

3, depreciation years

According to the accounting standards, the depreciation period of fixed assets is determined by enterprises according to the actual situation, and there is no specific age limit. However, the tax law stipulates the depreciation years. Among them, the housing structure is not less than 20 years; the other production equipment for aircraft, trains, ships, machinery and machinery is not less than 10 years; the appliances and tools furniture (related to production activities) is not less than 5 years; the transport vehicles other than the aircraft and train ships are not less than 4 years; and the electronic equipment is not less than 3 years.

In accounting, because there is no specific period of service, ordinary enterprises will choose years according to the performance of enterprises without violating the tax regulations. If enterprises do not want to pay more taxes, the depreciation years will be short; if they want performance, they are just the opposite.

4. Depreciation calculation method

Depreciation methods generally include average age method, workload method and accelerated depreciation method, and tax requirements are stricter.

(four) making use of bad debts

Generally speaking, the accounting methods of bad debts include individual assertion, percentage balance method and age analysis method. The age analysis method is more widely used by enterprises, and some enterprises combine individual identification method with age analysis method. These are all permitted by enterprise accounting standards.

What is the appropriate proportion of accounts and how to divide the age of accounts? There is no difference in view of the following points: first, according to the situation of Listed Companies in the same industry, such a bad debt recognition method is more scientific; two, it is confirmed according to the bad debt situation in the history of enterprises; three, it is prudent to confirm that accounts receivable accounts for more than three years should be recognized as bad debts; four, it should be analyzed according to the accounts receivable situation first, and the individual identification method should be applied, and the remaining age will be confirmed by aging analysis. No matter what way it is adopted, the general requirement must be reasonable and suitable for the occurrence of bad debts of enterprises. If enterprises suddenly change the proportion of bad debts, the reason is that they should be the same as the listed companies of a certain company. Then this reason is obviously not enough, and there is a possibility of regulating profits.

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