Analysis of the Financial Fraud Case of Hengli Industrial Development Group Co.,Ltd.

Abstract

Under the circumstances where the regulation on delisting in the capital market is becoming stricter, financial fraud not only disrupts the market order, but also highlights the serious harm caused by the deviation of accounting ethics and business ethics. Hengli Enterprise, as a listed company in the automotive air conditioning industry, from 2020 to the first half of 2023, in order to avoid the risk of delisting and ensure the private compensation of senior management,through its wholly-owned subsidiary, constructed a closed loop of ethylene glycol trade without commercial substance, and adopted means such as falsely increasing revenue and profits, fabricating accounts receivable turnover rate,and forging fund flow to carry out systematic financial fraud. The cumulative false increase in operating income was 595 million yuan. Eventually, due to the exposure of fraud, it was delisted and suspended by the Shenzhen Stock Exchange. The relevant responsible persons and the auditing institution were all severely punished. This article takes this case as the research object, combines the core points of the new business ethics and accounting ethics courses, uses the fraud triangle theory to analyze the pressure,opportunity and excuse motivations of fraud,systematically sorts out the commercial ethics deviations of directors, supervisors and management in the fraud, and explores the deep reasons for audit failure from four dimensions: accounting firms, certified public accountants, the audited entity and the external environment. The research aims to reveal the implementation logic and harm of financial fraud, provide practical references for listed companies to strengthen corporate governance, adhere to the bottom line of accounting ethics, and improve the audit supervision system, and help the capital market develop healthily and orderly.