The gatekeeper of capital market needs to rebuild cat-rat relationship

category:Finance
 The gatekeeper of capital market needs to rebuild cat-rat relationship


Behind every fraudulent company stands an intermediary or even several agencies. Some accounting firms fail to fulfill their verification obligations diligently, resulting in false records or major omissions. These actions not only disturb the capital market, but also cause significant losses to investors and investment institutions. An important reason for this is that some intermediaries are interested in colluding with listed companies to fake.

But besides this, there is another institutional reason that has been ignored for a long time. That is, all intermediaries are hired by listed companies at great expense. Obviously, it is only the professional ethics and conscience of intermediaries, not the professional responsibility they have to assume, that requires these institutions to come in and criticize listed companies.

In the market economy society, a common principle is that investors have the right to speak. Listed companies spend a lot of money to invite accountants into the door, naturally they want accountants to cooperate with themselves. When accountants discover that listed companies have fraudulent behavior, they must point out out that, out of responsibility, if listed companies insist on doing so, if accountants must ask them to correct, it is actually unable to pass through with their wallets. There will be many accountants who choose economic interests and turn a blind eye to the problems of listed companies.

Even if some CPAs have a sense of professional mission and want to disclose real information to the outside world, listed companies still have the toughest way to balance these non-authors, that is, to terminate cooperation with the intermediary. For an intermediary institution, this kind of experience means that it is the loser of the market. Obviously, in the face of such a system, intermediaries are weak.

Building Firewall

Make intermediaries more dignified

In fact, in the western market, distorted cat-rat relationship also exists in large quantities, as can be seen in the Enron scandal that broke out in the American market at the beginning of the 21st century.

In order to make intermediaries powerful and truly carry out their mission, radical reforms must be made to re-establish the cat-and-mouse relationship. Simply put, listed companies must accept auditing by accountants, but this audit should not be decided by listed companies themselves. By setting up a firewall between listed companies and accountants, cutting off the interest relationship between them and giving accountants enough dignity to enter listed companies, the situation of fraud in listed companies is expected to be curbed, and the probability of collusion between listed companies and intermediaries will be greatly reduced.

Specifically, it can be considered that the SFC or the exchanges can conduct qualification examination for accountants or other intermediary business personnel. If an enterprise wants to complete its IPO, it can send qualified accountants and other personnel to the SFC or the exchanges for relevant examination when applying to the SFC or the exchanges. Remuneration from listed companies is paid by the relevant institutions established by the SFC or the Exchange, and the source of funds is from the applicant enterprises or listed companies. A listed companys annual accounting report shall be examined accordingly. Accountants assigned to the listed companies for review should also be unstable, which can also avoid the possibility of insider trading under long-term cooperation. Of course, an unavoidable problem is that after the establishment of such a system, the newly established institution may not only be corroded by listed companies, but also by accounting firms. In order to avoid this situation, we can draw lots for accountants assigned to a listed company as auditors, in order to minimize the power in the process of black box operation space and the interests of listed companies to blend space. According to Chinas national conditions and the actual situation of the market, the system should be properly reformed and reformed so that it can better promote the healthy development of the market and protect the interests of investors. Source: Yang Qian_NF4425, Responsible Editor of Stock Market Weekly

Specifically, it can be considered that the SFC or the exchanges can conduct qualification examination for accountants or other intermediary business personnel. If an enterprise wants to complete its IPO, it can send qualified accountants and other personnel to the SFC or the exchanges for relevant examination when applying to the SFC or the exchanges. Remuneration from listed companies is paid by the relevant institutions established by the SFC or the Exchange, and the source of funds is from the applicant enterprises or listed companies. A listed companys annual accounting report shall be examined accordingly. Accountants assigned to the listed companies for review should also be unstable, which can also avoid the possibility of insider trading under long-term cooperation.

Of course, an unavoidable problem is that after the establishment of such a system, the newly established institution may not only be corroded by listed companies, but also by accounting firms. In order to avoid this situation, we can draw lots for accountants assigned to a listed company as auditors, in order to minimize the power in the process of black box operation space and the interests of listed companies to blend space.

According to Chinas national conditions and the actual situation of the market, the system should be properly reformed and reformed so that it can better promote the healthy development of the market and protect the interests of investors.