TITLE:
A Crazy Gamble: Xintai Electric in China Malicious Fabrication and Packaging Market Case
AUTHORS:
Wenjing Ma
KEYWORDS:
Internal Control, Xintai Electric Co., Ltd., Financial Fraud
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.2,
February
27,
2018
ABSTRACT: On June 1st, 2016, Xintai Electric Co., Ltd. released an announcement that China Securities Regulatory
Commission (CSCR) had finished its investigation for the company’s suspicion of
fraudulent issuing and illegal information disclosure, according to the administrative
penalty and market access prohibition notification from CSCR. Xintai became the
first company to be delisted due to fraudulent issuing, which drew concerns from
numerous investors and regulators. August 25th, 2017 was the last day Xintai occupied
an A-share market. From listing to delisting, going through three and a half years,
Xintai left the market with a serious warning that the first company to be forcibly
delisted in growth enterprise market for fraudulent initial public offering (IPO)
will never appear on the market again. The present article conducts research into
the internal control structure of listed company, in view of Xintai’s financial
fraud case. After reviewing the case and analyzing Xintai’s current inner control
situation, the paper tries to figure out deep links between financial fraud and
internal control, and then put forward some measures to improve internal control,
from the perspectives of COSO risk management framework and corporate governance.