Research on the Internal Control Defect Behind Financial Fraud

In recent years, financial fraud governance has emerged as a critical issue in corporate governance and financial sectors. Despite the establishment of regulatory frameworks to standardize capital market development both domestically and internationally, financial fraud incidents continue to occur. These incidents not only severely harm investor interests but also significantly disrupt socio-economic order and the entire capital market system. Therefore, research on financial fraud remains highly relevant. This paper reviews domestic and international literature on the definition, causes, methods, identification, prevention, and governance of financial fraud, aiming to provide insights for corporate listings.The paper firstly clarifies the concept of financial fraud, pointing out that it refers to intentional deceptive acts committed by relevant parties in financial activities with the purpose of obtaining illegal benefits, which violate laws, regulations, and ethical norms. It then delves into the causes of financial fraud from multiple perspectives such as internal corporate governance structure, external regulatory environment, and individual psychological factors. Regarding the methods of financial fraud, it comprehensively analyzes common techniques including financial statement fraud, insider trading, and market manipulation.