Internal Control and Audit of Related Party Transaction Fraud Risks: A Case Study of Zixin Pharmaceutical

Related party transaction as a potential area of fraud risks has been the focus of regulators and a key sign of risk warning.Fraud risk factors of related party transaction are diverse,so effective internal control and audit should be taken to reveal and prevent fraud risks of related party transactions.In this paper,we choose the case of alleged false financial reports in 2010 of Zixin Pharmaceutics as the object,and use the method of case study to reveal its problems and the truth.We found that,the motive of listed companies to conduct related party transaction fraud is to deiberately push the price of stocks so as to achieve the purpose of lifting the ban to maximize cash,deficiencies in internal control and dereliction of duty in auditing,thus creating an opportunity for related party transaction fraud.So,enterprises and accounting firms should improve internal control,especially the construction of executives'honest and law-abiding awareness,to enhance risk management capabilities;regulators also should strengthen regulation on the implementation of accounting standards,internal control standards,auditing standards and so on,to protect the public legal interest.