The so-called affiliated enterprises refer to enterprises with related party transactions. Due to the existence of related relationships, the relationships between related companies, shareholders of related companies, and creditors of related companies are becoming more and more complex. Affiliated companies use complex relationships to embellish financial statements, and even fabricate false financial data to defraud bank loans, manipulate stock prices, evacuate funds, etc., causing losses to relevant creditors and investors. Effectively identifying financial fraud methods of related companies is an important means for auditors to avoid audit risks. Based on audit practice, the author briefly analyzes the following common financial fraud methods in related companies:

(1) Fictitious economic business, false increase of assets, false reduction of liabilities, artificially inflating the asset size and funds of related companies strength.

For example: The parent company of some listed companies sells trademark rights, patents, technology and other assets to the listed company at a price that is much higher than the fair value, or pays off debts to the listed company.

The parent company of a foreign-funded enterprise inflates the book value of related assets by selling equipment, technology, raw materials, etc. to foreign-funded enterprises at high prices. Investments between affiliated enterprises can also overestimate non-cash assets through the above means. The recorded value is achieved to achieve the purpose of inflating capital.

In addition, mutual investment and shareholding between affiliated enterprises have also caused an inflated increase in the assets of both parties, affecting the correct judgment of users of accounting statements on the company's capital strength and asset scale.

(2) Fictitious profits.

Fabricating sales revenue and profits and whitewashing financial statements through related party transactions are common fraud methods used by related companies. The main methods are: 1.

In the purchase and sale of goods or services, affiliated companies purchase raw materials, parts or services from their parent company or other related parties at a lower price, and then purchase them from the parent company at a higher price. The parent company or other related parties sell goods or provide services and inflate profits. For example, when some companies are listed, they are formed by integrating the assets of their parent companies through splits, reorganizations, etc. After listing, they still have close relationships with their parent companies in terms of supply, production, sales and other services. When a listed company faces a loss, the parent company purchases the listed company's products in large quantities and sells raw materials to it at a lower price, thereby increasing the listed company's income and adjusting the listed company's profits; the parent company also lowers the payable amount of the listed company. According to the expense standards, or bear the management expenses, financial expenses, etc. of listed companies, in order to achieve the purpose of passing on expenses and adjusting profits. Some companies even achieve the purpose of whitewashing their statements by fabricating assets and liabilities such as receivables and payables, as well as income, expenses, and profit items that have never occurred. On the other hand, some companies use reverse operations to falsely reduce revenue and profits to achieve tax evasion or transfer funds. 2

. Adjust profits and financial status through asset restructuring. The parent company regulates the financial status and operating results of the borrowing company by replacing the non-performing assets of the borrowing company with high-quality assets, purchasing its claims at high prices, assuming its expenses or debts, and paying fund occupation fees. 3.

Create capital transactions at low or high interest rates to adjust financial expenses. 4

. Adjust profits by collecting or paying management fees or apportioning the same fees.

(3) Falsifying the operating performance of affiliated enterprises through entrusted operation, entrusted operation or cooperative investment.

For example: When an affiliated company is faced with factors such as long investment project cycles and high risks, if a certain part of cash is transferred to the parent company, entrusted to the parent company or invested in cooperation with the parent company, all investment risks will be transferred to the parent company. Part of it is passed on to the parent company, and the return on investment income is determined as the profit of the associated company for the year.

(4) Carry out asset leasing, asset replacement and equity swap at a price higher or lower than the market price.

Take asset transfer and replacement as an example, listing high-quality assets at very low prices. The listed company obtains high-quality assets at very low costs, and high-quality assets can bring huge profits. This can fundamentally to change the operating conditions of listed companies, thereby manipulating profits through unequal exchange.

(5) Taking advantage of corporate bankruptcy and liquidation procedures to harm the interests of creditors.

For example: bankrupt enterprises distribute and transfer assets to related parties for free before bankruptcy liquidation; sell goods or assets to related parties at lower prices; provide guarantees for the debts of related parties that originally had no property guarantee; and pay off in advance Related party debts; giving up claims against related parties or being lazy to exercise claims, etc.

Either form will reduce the distributable property and increase the creditor's losses.