A Crazy Gamble: Xintai Electric in China Malicious Fabrication and Packaging Market Case

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.