What Is a Financial Disclosure?

Financial information disclosure refers to information released by an enterprise on its financial status, operating performance or development prospects.

Financial information disclosure

Right!

Financial information disclosure refers to information released by an enterprise on its financial status, operating performance or development prospects.

A large number of facts prove that information disclosure is one of the decisive factors of corporate governance, and the corporate governance framework directly affects the requirements, content and quality of information disclosure. Generally speaking, information disclosure is restricted by both internal and external systems. The external system is the various regulations on corporate information disclosure by the state and relevant agencies; the internal system is the various requirements of corporate governance on information disclosure. These requirements may be related to information disclosure in terms of content, time, and level of detail External systems are consistent, and may not be completely consistent. In any case, there is a boundary in the company's information disclosure. Generally, the external boundary is determined by the external system of information disclosure, that is, laws and regulations; the internal boundary is determined by the corporate governance framework. In many countries, the company's information disclosure is not limited to the requirements of laws and regulations. Many companies' large amounts of information are voluntarily disclosed based on the goals of corporate governance. Therefore, corporate governance information disclosure has internal and external system constraints and motivation.

Practice also proves that the improvement of the information disclosure system is directly related to the success or failure of corporate governance. A strong information disclosure system is a typical feature of the company's supervision and is the key to shareholders' ability to exercise their voting rights. The experience of countries with active capital (stock) markets shows that information disclosure is also a powerful tool that affects corporate behavior and protects the interests of small and medium shareholders. A strong disclosure system helps attract funds and maintains public confidence in the capital market. Shareholders and potential investors need to receive regular, reliable, comparable and detailed information so that they can evaluate the manager's competence and make a basis for stock valuation, holding and voting Decision. The lack of information and unorganization will affect the market's ability to operate, increase capital costs, and lead to improper resource allocation. In view of the important role of information disclosure, countries around the world have put forward corresponding requirements for information disclosure in their corporate governance principles or research reports to ensure effective management of companies.

With reference to the relevant provisions of the Company Law, the Securities Law and other legal norms and relevant requirements of the securities regulatory authorities, the quality of financial information disclosure of listed companies. It is unanimously recognized that there are five quality requirements for authenticity, accuracy, completeness, timeliness, and fairness, and "truthful, accurate, complete, timely, and fair" is also the principle of information disclosure consistently adhered by the China Securities Regulatory Commission.

1. Authenticity. The authenticity of financial information disclosure is the most basic requirement for a listed company to disclose financial information, and it is also the key to the sustainable and stable development of the capital market. Only when based on objective facts and accurately reflecting the company's operating and financial conditions, can the information be disclosed. effect. If the information is distorted, it will harm the interests of investors, creditors, society, the state and the company itself, and it will have a bad impact on the capital market.

2. accuracy. The accuracy of financial information disclosure means that listed companies should be clear when they disclose financial information. Easy for investors and other users of financial reports to understand and use. Accuracy does not emphasize the consistency between the published financial information and the objective facts reflected by Du Peng, Xu Yan, and Zhang Min's financial information, but rather emphasizes between the publisher of financial information and the recipient of financial information, and between the recipients of information Consistent understanding of the same information.

3 Completeness. The completeness of financial information disclosure means that in order to achieve fairness, the information necessary to reflect the economic events of the listed company and its impact should be fully provided and make the users of financial reports easy to understand and make decisions. Complete disclosure should be comprehensive, appropriate, and effective.

4 Timeliness. The timeliness of financial information disclosure means that listed companies must abide by the timeliness of financial information disclosure requirements of the law, and must not forward or postpone the financial information to users in a timely manner to facilitate their timely use and decision-making.

5. Fairness. Fairness of financial information disclosure. It means that listed companies and other information disclosure obligors should disclose information to all investors at the same time, so that all investors can equally obtain the same information, and they must not disclose, disclose or leak to specific objects individually in advance.

1. The auditing bank's main financial statements and external audit statements are not consistent in their preparation methods, data sources, and aggregation levels, and lack standardized operating procedures.

2. When the audited bank's superior bank summarized the financial statements, there was a lack of standardized verification procedures and incomplete data verification, which caused errors in the data of the statements that were not corrected in a timely manner.

3. The manual adjustment of the main financial statements of the audited bank has not been approved by the superior bank. For the unevenness of the report caused by the operation of the accounting host or the report system, the financial statements can be adjusted directly without verification and authorization.

4. External audit reports involving multiple reporting departments, the division of labor is not clear, and the lack of summary audit departments, resulting in errors in statement books have not been corrected.

5. The lack of a verification procedure in the external audit report preparation process caused the report data to be inconsistent with related reports or systems.

6. Some external audit report data lack system or account support, and the data source lacks reliability.

7. The audit report submitted to the outside has not been kept for custody and cannot be checked at the time.

8. When submitting non-non-audit data, the business department directly provided the revised data to the external audit agency, but did not pass the unified review and submission by the external audit coordination department.

The disclosure of financial information of listed companies must be true, accurate and timely. After years of system construction, China has established a relatively complete financial information disclosure system, and the accounting and auditing systems have also matured. A comprehensive assessment of the status of financial information disclosure of listed companies in China has drawn the following conclusions.

1. The authenticity and accuracy of financial information has been greatly improved

Generally speaking, due to the implementation of new accounting standards, the strengthening of securities market supervision, and the growing maturity of investor groups, the quality of financial disclosure of Chinese listed companies has continued to improve in recent years, and the authenticity and accuracy of financial information has been increasing.

In the history of China's securities market development, changes in the accounting system and regulatory policies of the securities market, such as the listing and issuance policy, the post-listing rights issue policy, the special handling policy, and the delisting policy, have a direct impact on the authenticity of listed company information disclosure . In the early stages of the development of the securities market, from the case of fictitious profits of listed companies such as China Reserve, Vitality 28, China Hi-Tech, Ocean Group, and Qiong Minyuan, it is not difficult to draw an intuitive conclusion: the financial data of early listed companies is not reliable.

For example, before the implementation of the new accounting auditing standards, the phenomenon of listed companies' manipulation of profits under the name of correction of accounting errors became increasingly serious. For example, in 2005, more than 80 companies in the Shanghai Stock Exchange had accounting error corrections, and the number of accounting error corrections remained high. Some listed companies' accounting error corrections had obvious signs of artificial design and evasion of supervision. Securities companies' investment or entrusted wealth management retrospectively accrues impairment. A large number of listed companies have adopted a policy for the provision of bad debts combined with individual accreditation. However, with the improvement of information disclosure regulations, especially the implementation of new accounting and auditing standards in 2007 and the continuous increase in government supervision, the quality of financial information disclosure has been greatly improved, and the financial disclosure of listed companies has been partially resolved. Question of authenticity.

The financial data disclosed by China's listed companies is also inaccurate. This can be confirmed by the number of supplementary announcements and correction announcements by listed companies on their periodic reports. In terms of quantity, during the disclosure process of the 2000 interim report, 105 companies published supplementary or correction announcements, accounting for 10.18% of all companies; in 2001, 120 companies published these two types of announcements, accounting for all 10.42% of the company. From the 2005 and 2007 Shanghai and Shenzhen Stock Exchange's post-audit review of the annual report, the Shanghai and Shenzhen Stock Exchanges have issued a considerable number of audit opinion letters or inquiry letters (see Table 3.2), urging listed companies to amend their annual report content. . For example, in 2007, the relevant departments of the Shanghai Stock Exchange issued a total of 340 letters of post-mortem review opinions, asking listed companies to explain and explain relevant issues in their annual reports. A total of 165 companies issued supplementary or correction announcements. The Shenzhen Stock Exchange issued 214 inquiry letters of various types and urged 47 companies to publish 61 annual supplementary or correction announcements on major omissions or errors in the annual report.

There have been many research results on the quality evaluation of financial disclosure of listed companies, but generally there is no generally accepted and reliable evaluation standard. At present, the Shenzhen Stock Exchange's rating on the quality of information disclosure of listed companies in the Shenzhen stock market is a relatively authoritative evaluation of the quality of information disclosure. According to the rating results, the information disclosure of China's listed companies has shown a trend of improvement year by year, which is manifested by the gradual increase in the proportion of companies with excellent and good information disclosure.

2. Significant reduction in audit non-standard opinions

The "non-standard opinions" of the audit can reflect the quality of financial information disclosed by listed companies from one aspect, and the increase or decrease of the "non-standard opinions" can also reflect the changes in the quality of financial information disclosure of listed companies in China to a certain extent. The table of non-standard audit opinions shows that from 1998 to 2003, the proportion of non-standard audit opinions among listed companies in the Shanghai Stock Exchange basically showed a downward trend year by year, falling from more than 80 and about 18% in 1998 to 2003. Nearly 60 homes and about 7%. However, in 2004 and 2005, the number and proportion of non-standard audit opinions among listed companies on the Shanghai Stock Exchange continued to rise. The number of non-standard audit opinions in 2006 was basically the same as that in 2005, and the proportion of non-standard audit opinions was close to 10% of all companies. The number and proportion of non-standard opinions declined significantly in 2007.

As of April 30, 2008, the disclosure of the 2007 annual report of listed companies in the Shanghai Stock Exchange has basically ended. Except for Jiufa, a total of 862 companies disclosed the 2007 annual report as scheduled, of which 67 companies' annual financial reports were certified by accounting firms. A non-standard unqualified audit report was issued. The proportion of non-standard audit opinions was 7.8%, a significant decrease from 2006. Of the 67 companies that were issued with non-standard audit opinions in the 2007 annual report of Shanghai Stock Exchange, 50 were issued with unqualified audit reports with emphasized matters, accounting for 74.6% of the total non-standard; 9 companies were issued Audit reports with qualified opinions (including 3 qualified opinions with emphasized matters), which accounted for 13.4% of the total non-standards; another 8 companies were issued audit reports that could not express their opinions, accounting for 12 of the total non-standard opinions. 0%; no company has been issued an audit report with a negative opinion. In addition, as many as 139 companies in the Shanghai Stock Exchange have voluntarily disclosed internal control self-assessment reports and verification evaluation opinions of audit institutions, a three-fold increase over previous years, indicating that listed companies have achieved certain results in internal control.

After 18 years of rapid development, China's capital market has made tremendous progress. In 18 years, China's capital market has gone through mature markets for more than a hundred years, and has established a modern capital market that is becoming more sophisticated in all aspects. Truthful, accurate, timely and fair information disclosure is an important prerequisite for the full functioning of capital market functions, and it is essential for China's capital market to achieve greater and better development in the future.

Based on the established financial information disclosure system of listed companies, we should further strengthen supervision, strengthen the role of third-party entities such as news media and accounting firms in the disclosure of listed company information, and expand the content and scope of listed company financial information disclosure. , Actively encourage voluntary information disclosure and promote the further improvement of the quality of financial information disclosure of listed companies in China.

1. The disclosure of predictive financial information and information about major related transactions should be strengthened

(1) Strengthening predictive financial information

Although the theoretical community has different views on predictive information disclosure, from the practice of countries and regions such as the United States, Britain, Canada, Singapore, Hong Kong, China and Taiwan, these countries or regions have established predictive information disclosure systems. The International Accounting Standards Committee (IASC) has also formulated relevant specifications for predictive financial information, which cover the content of disclosure, the time span of disclosure, the form of disclosure, the format of disclosure, and the supervision of predictive information.

From the perspective of China's practice, China's predictive financial information only stays at the stage of profit forecasting and performance forecasting, and most companies do not make predictive explanations of other financial items (such as quantitative analysis of business in the new year, etc. Wait). On the one hand, because China has not yet established a perfect predictive information disclosure system; on the other hand, listed companies are considering the cost and risk considerations. For example, on July 14, 2000, the China Securities Regulatory Commission The predicted gap is more than 20% proposed by 11 companies including Changjiu Chemical, Hualin Tire, Dayuan, A Relay, China Clothing, Aerospace Technology, Xingfa Collective, Hualing Pipeline, Jinniu Co., Liming Clothing, Zhejiang Pharmaceutical, etc. Notice of criticism. The establishment of a predictive financial information disclosure system has a special effect on the development of China's capital market. When investors cannot obtain sufficient and effective information in the capital market, then they can only adopt a wait-and-see or blind decision-making attitude, which is not conducive to the development of the capital market. For investors, although they do not reject past and present information, they prefer future-oriented forward-looking information. From the 2008 Shanghai and Shenzhen Stock Exchange's post-hoc disclosures of the annual reports of listed companies, it appears that there is still serious irregularity in the performance of listed companies' performance predictions, and supervision should be strengthened in the future.

(2) Strictly related transaction information disclosure

The China Securities Regulatory Commission has detailed requirements for the disclosure of related party transactions. For example, related party transactions involving listed companies and related legal persons with an amount of more than 3 million yuan and accounting for more than 0.5% of the company's net assets should be disclosed in a timely manner. The Ministry of Finance has also clearly stipulated that the nature of related party relationships, transaction types, pricing policies, transaction proportions and other transaction elements should be disclosed in the notes to the accounting statements with related party companies.

"China Corporate Governance Report (2006)" has conducted a special study on the connected transaction behavior of listed companies, pointing out that the connected transaction behavior of listed companies in China as a whole needs to be further regulated. Therefore, the disclosure of related party transaction information in the disclosure of financial information of listed companies is of great significance. Judging from the public condemnation of listed companies by the Shanghai and Shenzhen Stock Exchanges in the past years, a large proportion of illegal connected transactions or illegal provision of financial guarantees to related parties. Some listed companies still have the situation of disclosure of important elements of related party transactions, avoiding the truth. With the strengthening of the supervision of listed companies in recent years, the disclosure of related party transaction information of listed companies has been greatly improved, but the disclosure of related party transactions still has the phenomenon of heavy form and light substance. For example, when some listed companies disclose related party transactions, there is no distinction between related parties that have a controlling relationship and those that do not. This is particularly important in related party transactions, because the influence of the existence of a control relationship and the absence of a control relationship on listed companies are completely different. Another example is that some disclosed information does not indicate whether the relevant assets have been audited, evaluated, or whether they are priced in accordance with the accounting principles of independent enterprises. Therefore, the China Securities Regulatory Commission and the exchanges also need to actively study and carry out stricter supervision on the information disclosure of connected transactions of listed companies.

2. Actively promote voluntary information disclosure by listed companies

Compulsory information disclosure and voluntary information disclosure are complementary and indispensable. In different periods of economic development, the two can be transformed into each other, that is, the information disclosed voluntarily in the previous historical period may become mandatory disclosure in the later historical period, and the information disclosed in the previous historical period is mandatory. It may also become voluntary disclosure in the latter historical period. This change is closely related to the development stage of the securities market and the maturity of information users. Therefore, it is highly undesirable to delimit the boundaries between mandatory and voluntary information. For the time being, regulators should maintain a balanced development of mandatory disclosure and voluntary disclosure, rather than blindly emphasize the replacement of voluntary disclosure with mandatory disclosure.

Voluntary information disclosure is the behavior of listed companies' voluntary disclosure of information, but it is not arbitrary free disclosure. As a necessary supplement to mandatory information, it should be carried out under a certain regulatory system. The development of voluntary information disclosure in China is obviously slower. The reasons are: on the one hand, because of the weak concept of listed companies, and the willingness to disclose independently; When a problem occurs, it needs to be borne by the listed company. As a supervisory authority, on the one hand, we must strengthen the legal system for voluntary information disclosure and take measures such as "safe harbors" to actively encourage listed companies to disclose voluntary information. Voluntary information disclosure.

The degree of voluntary disclosure by Chinese listed companies is closely related to two factors. On the one hand, it is positively related to the proportion of the number of independent directors of the ancient board of directors. The policy implication of this conclusion is that the independent director system should be actively promoted and continuously improved, and independent directors should be given certain information disclosure decision-making rights, so as to gradually improve the voluntary disclosure of listed companies in China. The other is related to the type of shares issued by the company. In contrast, listed companies that issue domestic and overseas listed stocks are more likely to disclose voluntarily. This fully shows that external governance can have a very significant influence on the voluntary disclosure of companies. The policy implication of this conclusion is that in order to improve the voluntary disclosure behavior of listed companies, the external market governance construction of listed companies in China should be further strengthened and regulated, and joint governance of stakeholders and takeover and acquisition by third-party market forces should be adopted to form a strong Incentive and restraint mechanism to gradually cultivate the willingness and preference of listed companies for voluntary disclosure.

3 Continue to develop institutional investors. Strengthening demand-side constraints on information disclosure of listed companies

Information disclosure, especially financial information disclosure, is an important link connecting the supply and demand sides of stock market funds. The content and quality of financial information disclosure have always been highly valued by various participants in the stock market. As a supplier of the capital market, investors have strict requirements on information disclosure in the securities market from the perspective of maximizing their own interests. Under other conditions, the required rate of return of investors is directly proportional to the predicted level of risk. The higher the uncertainty of future returns, the higher the rate of return required by investors. Improve the quality of disclosures and reduce the level of risk that investors consider when estimating future returns. As a result, the return on investment required by investors is reduced, and the company's financing costs are reduced accordingly.

Although the proportion of institutional investors in China is increasing, individual investors still occupy a considerable proportion of investors in China's securities market. Most individual investors do not read other financial information in periodic announcements, nor do they accurately understand the information disclosed in the balance sheet and income statement, in addition to their earnings per share indicators. A sound financial information disclosure system not only requires disclosure, but the information disclosed must be known and understood by investors. In a certain way, the professional quality of investors should be improved and the development of institutional investors encouraged.

4 Increase penalties for violations of laws and regulations on information disclosure of listed companies

Judging from the time when the China Securities Regulatory Commission imposed administrative penalties on listed companies for false financial information, there is a considerable lag. For example, the China Securities Regulatory Commission imposed administrative penalties on the Shanghai University of Science and Technology Innovation (600551) in 2005 for falsely increasing sales revenue and profits in 2002; administrative penalties for the Shenzhen market's fellow Huasu (000509) were based on its 2000 and 2001 Fictional profits, the fact that the 2002 Interim Report rarely disclosed losses and the false entrustment of financial management, etc. For the securities market, such penalties seem to be too lagging and hinder investors' investment judgment. Therefore, the China Securities Regulatory Commission should strengthen its law enforcement efforts to improve the efficiency of supervision and facilitate more effective and timely supervision by reducing the time required for the investigation and punishment of violations of information disclosure.

The regulatory authority of the stock exchange mainly reflects the stage of continuous disclosure of information of listed companies, that is, the review of periodic reports and interim reports provided by the listed companies as carriers of information. Due to the limited manpower and material resources of the exchange, it is difficult to achieve the goal of carefully reviewing the information disclosure materials reported by many listed companies. By comparing the time and content of the public condemnation of the listed company by the exchange, we find that the exchange can publicly condemn the listed company in a timely manner and fail to submit periodic reports within the prescribed time, but it cannot detect and condemn other irregularities in time Financial information behavior. This has resulted in inadequate scrutiny and failure to detect problems in a timely manner. After discovering the problem, although the exchange may require the listed company to continuously explain to clarify the problem, it cannot make a substantial judgment on the suspicious problem. At the same time, because the exchange does not have the right to investigate listed companies, the ability to supervise the authenticity of information disclosure is limited. For exchanges, they should actively adopt a market-oriented regulatory system, change institutional arrangements that exclude real financial information, and improve the level and efficiency of market supervision.

5. Strengthen the role of accounting firms in the disclosure of financial information of listed companies

Financial information is the basis for investors to understand the financial status of listed companies and make investment decisions, and its quality directly affects the effectiveness of resource allocation. Certified public accountants are an important force to ensure the quality of financial information. Under market conditions, the role played by certified public accountants is mainly reflected by ensuring and improving accounting quality. The supervision role of accounting firms in information disclosure should be strengthened. However, in China's securities market, the role of intermediaries such as accounting firms has not been fully exerted. On the one hand, this is because the intermediary agencies of our country lack application independence; on the other hand, because of the vicious competition among intermediary agencies, the intermediary agencies are afraid to lose their customers, so that they dare not rely entirely on accounting standards to issue audit reports. This also explains why the early fraud cases such as Qiong Minyuan and Vitality 28 were disclosed by the press, rather than discovered by CPAs. Judging from the disclosure of the annual reports of listed companies in 2007, the practice level of certified public accountants is uneven, the evaluation standards are different, and the use of some non-standard audit opinions is inappropriate, which reduces the effectiveness of audit reports to a certain extent. Some of the contents of the emphasized matter opinions do not belong to the matters or situations in which the emphasized matter paragraphs are issued in accordance with the auditing standards. Some of the emphasized matter paragraphs are incomplete and some of the matters involved are quite serious in nature. Therefore, more serious audit opinions should be issued. Regarding the reserved opinions, some accountants avoided the importance and were vague, and issued a qualified opinion on the grounds that the audit scope was limited. They did not follow the requirements of the auditing standards to explain as much as possible the impact of related matters on the accounting statements.

With the strengthening of the accounting system and supervision, such an institutional arrangement has prompted CPAs to strengthen their independence. The pressure of non-standard audit opinions also urges listed companies to pay full attention to the types of audit opinions of annual reports, which forces the senior management of listed companies to have pressure and motivation to listen to and respect the different opinions of certified public accountants, and to correct accounting treatment errors or improper To provide more authentic financial information for the securities market. For accounting firms, it is still necessary to strengthen accountability for accounting errors, so that the firms have joint responsibility for information disclosure. Therefore, we can consider establishing a civil compensation system for CPAs to increase the costs of CPAs' negligence.

6. Give full play to the supervisory role of news media and public opinion

News media supervision has played an active role in information disclosure and deterring offenders. The financial media's role in supervising and supervising listed companies is even more important and direct than the administrative supervision of the CSRC. They come into play as soon as a problem occurs or is happening, and the regulatory oversight of the SFC often does not come into effect until the end of the event. It is conducive to improving the transparency of the securities market, ensuring the stable operation of the securities market, and at the same time effectively protecting the legitimate rights and interests of investors. The supervision of the news media and public opinion has a supporting role in the supervision of the CSRC. Take the Enron incident in the United States as an example. Without the financial media to actively play its role of public opinion supervision, the Enron incident may not have been revealed so far.

China's securities market emphasizes the mobilization of various forces to strengthen supervision, so the role of news media and public opinion supervision should not be ignored. From the earliest Yinguangsha to Jiangsu Qionghua, almost every listed company case handled by the securities regulatory department has the trace of supervision by the media. In fact, since the mid-to-late 1990s, China's securities market has attached great importance to the supervision of news and public opinion. The China Securities Regulatory Commission reports to the Standing Committee of the National People s Congress on the implementation of the Securities Law and also calls for greater public opinion oversight and the use of the sunshine function of the news media to curb inappropriate behavior of listed companies. News media and public opinion should become the supervisors of financial information disclosure of listed companies and play a positive role in restricting the financial information disclosed by listed companies.

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