It is a serious violation of professional ethics and the law for corporate executives to manipulate internal information to mislead investors and shareholders for personal gain. The following are some common methods and related analysis.： ### Financial fraud 1. **Fictitious income** -**Means**： -Senior executives instructed financial personnel to falsify a series of documents such as sales contracts, shipping vouchers, and invoices to fabricate sales revenue out of thin air. For example, forging large-scale sales contracts with non-existent or false customers, making false logistics delivery records, and issuing fake invoices to support false revenue data. -Confirm income in advance, and confirm income when the main risks and rewards in the ownership of the goods have not been transferred to the purchaser. For example, when the product is still in transit, the installation and commissioning have not been completed, and the customer has not passed the formal acceptance, the sales revenue will be confirmed. -**Impact**: Exaggerate profits, mislead investors and shareholders into thinking that the company's performance is good, and attract more investment. Stock prices may rise due to false positive news, and executives can take the opportunity to reduce their holdings to make a profit. At the same time, false financial conditions may mask problems in the company's actual operations, exposing investors and shareholders to greater risks of loss in the future. 2. **Concealment of expenses or costs** -**Means**： -Capitalize expenditures that should have been included in the current expenses, increase the value of assets, and reduce current expenses. For example, R&D expenses, advertising expenses and other expenses that should have been paid in one lump sum in the current period are unreasonably apportioned to multiple accounting periods as intangible assets or long-term amortization expenses, thereby reducing current costs and expenses and increasing profits. -Delay in confirming costs, such as accounting for procurement costs and production costs that have occurred in time, resulting in underestimation of current costs. For example, at the end of the period, the cost of raw materials that have been stored but have not been invoiced will not be recorded, or the production cost that has been completed but has not been carried forward will be recorded, causing the current profit to increase. -**Impact**: Artificially increase the company's profitability, whitewash the financial statements, and make investors and shareholders overestimate the company's profitability and value. When the actual costs and expenses are finally confirmed, the company's performance may decline sharply, leading to a decline in the stock price and losses for investors and shareholders. Executives may obtain high salaries, bonuses, or equity gains for personal gain under the support of false performance. 3. **Provision for impairment of operating assets** -**Means**： -Deliberately under-provision for asset impairment, and when there are obvious signs of impairment of assets, the impairment is not fully accounted for in accordance with the requirements of accounting standards. For example, for accounts receivable, knowing that some customers have greater repayment difficulties, they do not increase the proportion of bad debt provision accordingly; for inventory, when the market price falls sharply, it is still priced at a higher cost, and the inventory is not prepared for price drops in time. -Adjust profits by transferring back to the asset impairment provision made in the previous year. In the years when the company's performance is poor, more impairment preparations are made to form secret preparations, and then when the performance needs to be improved, it is transferred back to the impairment preparations to increase the current profit. -**Impact**: Make the carrying value of assets inconsistent with the actual value, exaggerate profits or conceal losses. Misleading investors and shareholders' judgments about the company's asset quality and profitability may lead them to make wrong investment decisions. Executives can use the results of profit adjustment to obtain personal benefits, such as high rewards for achieving performance appraisal goals, or selling stocks to make a profit when the company's stock price rises due to false performance. ### Information disclosure violations 1. **Selective disclosure of material information** -**Means**： -Executives only disclose the company's major positive news to some specific investors or shareholders, such as the signing of major contracts, the success of new product research and development, and major asset restructuring, etc., while concealing and not reporting the company's major risk factors, such as major litigation, increased market competition, and unfavorable policy changes. -Use internal information channels to disclose inside information to closely related institutional investors or individual investors before the official announcement, so that they can layout in advance and gain trading advantages. -**Impact**: Enables some investors to use information to trade for profit in advance, while other investors and shareholders are at an information disadvantage, resulting in an unfair market environment. Stock price fluctuations may not truly reflect the company's fundamentals, mislead investors' investment decisions, and harm shareholders' interests. Executives may profit from the exchange of interests with specific investors or their own advance transactions. 2. **Delay in disclosure of unfavorable information** -**Means**： -After the company has major negative events, such as product quality problems, major safety accidents, financial fraud investigations, etc., deliberately delay the disclosure time to minimize the negative impact on the stock price. Executives may instruct relevant departments to block news and not notify regulators and investors in a timely manner. -For various reasons, such as the verification of the situation, the complexity of the internal process, etc., to find excuses for the delay in disclosure, and the disclosure will not be made until the situation develops to the point where it is impossible to conceal it. -**Impact**: Investors and shareholders cannot keep abreast of the company's true situation in a timely manner, and make investment decisions with insufficient information, which may lead to investment losses. When unfavorable information is finally disclosed, stock prices often fall sharply, harming the interests of shareholders. Executives may want to take advantage of the delayed disclosure time difference to stabilize the stock price in order to carry out asset disposal or stock cash-out operations for personal gain before the stock price falls. 3. **False statement