"Financial fraud" has been familiar to us since the late 1990s. The US "Audit Standards Notice No. 16" clearly stipulates that fraud is the deliberate preparation of false financial statements. China's "Specific Standards for Independent Auditing No. 8" defines fraud as intentional behavior that results in false reflections in accounting statements. Financial fraud can be divided into management fraud and employee-level fraud according to the fraud subject, and can be divided into malicious fraud and good-faith fraud according to the purpose of fraud. Financial statement embellishment means (1) Adjusting profits by using physical assets and equity swaps. This method is usually used by listed companies and parent companies or other related parties. They achieve their purpose of increasing profits through physical assets and equity swaps. For example, the resolution on asset exchange between Shimao Co., Ltd. and Shanghai Shimao Construction Co., Ltd. agreed that the company would use its 183,750 equity shares and 67.92 million yuan in cash in Shanghai Shimao International Plaza Co., Ltd. to exchange the Shanghai shares held by the joint-stock company Shimao Construction. Shimao Hubin Real Estate Co., Ltd. exchanged 500,000 shares. With such a replacement, WTO's annual performance in 2003 soared 25 times year-on-year. (2) Use the adjustment of non-operating income or subsidy income to whitewash the annual report. This is a common method used by ST Company. Non-operating income refers to various incomes that are not directly related to the production and operation activities of the enterprise. It is not generated by the consumption of operating funds of the enterprise and does not require the enterprise to pay any price. It is actually a kind of pure income and cannot and does not need to be related to Costs are matched. It is not long-term and stable, and its impact on profits is temporary. Therefore, non-operating income often becomes the "regulator" of profits. (3) Using the adjustment of inventory value for profit manipulation First of all, different methods of inventory valuation will have different impacts on the financial status and profit and loss of the enterprise. If the ending inventory is overvalued or the beginning inventory is undervalued, current income may increase as a result, and vice versa. Therefore, changes in inventory valuation methods can create a certain amount of room for profit adjustment. Secondly, when some companies use the fixed cost method to calculate product costs, they allocate the product fixed cost difference between products and inventory products, but do not apportion the products sold in the current period, in order to reduce the current sales cost. What's more, they deliberately falsely list inventory or conceal inventory shortages or damage, thereby achieving the purpose of falsely increasing profits for the current period. Although this approach makes the listed company's financial statements look good that year, it casts a shadow on its future development prospects. (4) Using the adjustment of accounts receivable, other receivables, and other payables to cover up the annual report. Other receivables and other payables are called the "trash can" and "treasure bowl" in accounting statements. The former conceals potential losses, and the latter Conceal profits. It is not uncommon for listed companies with false annual reports to make fuss about receivables or other receivables to achieve the purpose of inflating profits. Some listed companies often put some receivables that are difficult to recover on their accounts to inflate their assets. . (5) Use accrual means combined with accounting estimates to adjust profits. Enterprises accrue huge amounts of secret reserves, making estimated accruals a common means of manipulating profits. The methods of secret preparation generally include the following: underestimating assets, overestimating liabilities, not reflecting the value of certain specific assets, and shelving mechanism adjustments when asset values ??rise. (6) "Loss of money" in expenses and "inflated profits" Listed companies can also achieve the purpose of inflating profits by adjusting expenses for the current period. In actual processing, some companies often use "prepaid expenses", "long-term prepaid expenses", "construction in progress" and other accounts to adjust accounts, and gradually amortize them in subsequent years, so as to achieve the purpose of smoothing profits.