Are agricultural listed companies prone to fraud? Why?

@ Luopu has elaborated very well, and I would like to add it here.

There are many cases of fraud in agricultural listed companies: Yinguangxia, Lantian and ST Golden Eel, Angel Pharmaceutical, Greenland New Land and Wanfushengke.

Generally speaking, the problem of financial fraud in agricultural enterprises is characterized by fictitious profits, so the method of fictitious profits is nothing more than starting from two aspects:

1, inflated income: nothing more than unrelated related party transactions, making false sales through related companies; For Xerox's fictitious income, the time and proportion of income recognition are advanced.

2. Reduce costs and expenses: remove costs and expenses from the books.

1, thanks to the preferential agricultural tax, the cost of inflated income is low, as explained by @ ROP. In fact, the sale of agricultural and sideline products produced by ourselves can be completely exempted from value-added tax and enterprise income tax.

2. High proportion of cash settlement: cash is often used instead of bank transfer in the purchase and sale of agricultural and sideline products, which causes fundamental difficulties in auditing.

3. Productive biological assets are difficult to check: there is a lot of room for regulation and control to check the value of trees and cultured animals in agriculture, and it is also difficult to find out clearly, such as ST golden eel in Zhangzidao and eel in Liaoshen.

-

The following is the "New Earth Case Involving Operation Technology and Verification Means" I wrote before, which can be used as a reference for analyzing agricultural enterprises:

I. Operation Methods Although the National Business Daily has a long report on the new earth, in fact, the operation methods of the new earth disclosed in the report are nothing more than two:

1, inflated income, no related transactions, with related natural persons or legal persons as the main customers.

2. Conceal the cost, and some raw material purchases may not be accounted for.

Two. Doubt and verification mean 1. Industry status and production capacity: Industry status usually means the market competitiveness of enterprises, and large production capacity (matching with sales volume) means that enterprises may obtain higher gross profit due to scale effect.

2. Brand: brand awareness and reputation need to be managed and accumulated. As far as consumer goods are concerned, it is usually illogical to lead the industry if the brand awareness is not high, such as "beautiful scenery".

3. Sales channels: including marketing network, sales regional distribution and sales model are all points worthy of attention. Among them, the excessive concentration of sales areas means two things: one is the weak ability to expand in different places, the other is the poor ability to resist the risk of regional market fluctuations; The sales model determines the market control, accounting period and so on.

4. Customer: Customer verification is a very important content, which involves the authenticity of income. Customer concentration and stability, low customer concentration and high stability of large customers are usually a good signal. The means of checking customers are relatively simple, such as visiting the disclosed address, tracing the trail according to the information searched online and industrial and commercial information, and interviewing store employees as customers. Using the above means, if there is any abnormal situation, it can be found. From this point of view, abnormal corporate customers' registration time, registered address, business scope, investors, asset size, news, job advertisements and other industrial and commercial information and information left on the Internet will become flaws.

5. Gross profit margin: Gross profit margin is a very important indicator, and abnormal gross profit usually means there is a problem. Gross profit margin is determined by two indicators, one is revenue and the other is cost. Excessive gross profit margin means inflated income and hidden costs, in which inflated income is common in inflated sales unit price; The way to hide the cost is generally not recorded, but the actual cost can be estimated by decomposing and analyzing the cost composition. It is not impossible to surpass the profits of peers, but it needs the support of brand, technology and production efficiency. The verification of gross profit margin, on the one hand, compares the gross profit margin of peers, on the other hand, pays attention to the intertemporal fluctuation of gross profit margin. Unstable gross margin usually means abnormal data adjustment.

6. Specialty stores: As a special chain sales terminal, specialty stores are usually the focus of verification. Whether the sales revenue of the store is consistent with the disclosure can be estimated through interviews and sampling calculations; The non-direct operation of direct-operated stores is equivalent to the non-related business model of related party transactions. By checking major customers, we can find out the abnormal situation of the stores.

7. Other financial indicators that need attention: It is not mentioned in the report, but it is usually necessary to pay attention to financial indicators including inventory, accounts receivable, accounts payable, prepayments, other accounts receivable, accounts payable, etc., and clarify the corresponding relationship and matching between assets and business.