{"id":12568,"date":"2026-10-09T20:31:26","date_gmt":"2026-10-09T12:31:26","guid":{"rendered":"https:\/\/fdlaw.com.tw\/?p=12568"},"modified":"2026-10-10T15:09:11","modified_gmt":"2026-10-10T07:09:11","slug":"listed-company-financial-statement-fraud-defense","status":"publish","type":"post","link":"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-financial-statement-fraud-defense\/","title":{"rendered":"What should you do if a listed company is accused of falsifying financial statements, engaging in fraudulent transactions, or inflating revenue? First, reconstruct the transaction, accounting, and decision-making processes."},"content":{"rendered":"<style>.fd-financial-fraud{color:#293746;line-height:1.9}.fd-financial-fraud *{box-sizing:border-box}.fd-financial-fraud p{margin:0 0 18px;font-size:17px;line-height:1.9}.fd-financial-fraud h2{margin:42px 0 18px;padding:15px 20px;border-left:4px solid #b3873c;background:#edf3f8;color:#173a5e;font-size:25px;line-height:1.45;font-weight:700}.fd-financial-fraud h3{margin:24px 0 10px;color:#173a5e;font-size:19px;line-height:1.5;font-weight:700}.fd-financial-fraud .fd-intro{margin:0 0 30px;padding:22px 24px;border-left:4px solid #b3873c;border-radius:5px;background:#f2f6f9}.fd-financial-fraud .fd-intro p:last-child{margin-bottom:0}.fd-financial-fraud .fd-period{display:block;padding:18px 20px;border-left:4px solid #b3873c;background:#f2f5f8;color:#173a5e}.fd-financial-fraud .fd-cta{margin:30px 0;padding:22px 24px;border:1px solid #d8c49e;border-radius:6px;background:#fffaf1}.fd-financial-fraud .fd-cta h2,.fd-financial-fraud .fd-cta h3{margin:0 0 16px;padding:0;border:0;background:none}.fd-financial-fraud a{text-decoration:underline;text-underline-offset:3px}.fd-financial-fraud .fd-actions{display:flex;flex-wrap:wrap;gap:12px}.fd-financial-fraud .fd-button{display:inline-flex;justify-content:center;padding:12px 18px;border-radius:6px;background:#173a5e;color:#fff;text-decoration:none;font-weight:700}.fd-financial-fraud .fd-button.secondary{background:#fff;border:1px solid #173a5e;color:#173a5e}@media(max-width:720px){.fd-financial-fraud p{font-size:16px}.fd-financial-fraud h2{margin-top:32px;padding:13px 15px;font-size:21px}.fd-financial-fraud h3{font-size:18px}.fd-financial-fraud .fd-intro,.fd-financial-fraud .fd-cta{padding:20px 18px}.fd-financial-fraud .fd-button{width:100%}}.fd-financial-fraud details{border:1px solid #dde5ed;border-radius:6px;background:#fff;margin:0 0 12px;padding:16px 20px}.fd-financial-fraud summary{cursor:pointer;font-weight:700;color:#173a5e;line-height:1.6}.fd-financial-fraud details p{margin:14px 0 0}.fd-financial-fraud .fd-case-image{margin:24px auto;max-width:472px}.fd-financial-fraud .fd-case-image img{display:block;width:100%;height:auto}.fd-financial-fraud .fd-case-image figcaption{font-size:14px;text-align:center;color:#526475;margin-top:10px}.fd-financial-fraud .fd-compare{margin:28px 0}.fd-financial-fraud .fd-compare-grid{display:grid;grid-template-columns:repeat(2,minmax(0,1fr));gap:16px;margin-bottom:16px}.fd-financial-fraud .fd-compare-card{border:1px solid #dce4ed;border-top:3px solid #b3873c;border-radius:5px;background:#f7f9fb;padding:20px}.fd-financial-fraud .fd-compare-card h3{margin:0 0 10px}.fd-financial-fraud .fd-compare-card p{margin:0}@media(max-width:767px){.fd-financial-fraud .fd-compare-grid{grid-template-columns:1fr}}.fd-financial-fraud .fd-chain-grid{display:grid;grid-template-columns:repeat(5,minmax(0,1fr));gap:8px;margin:18px 0}.fd-financial-fraud .fd-chain-step{padding:14px 8px;border:1px solid #dce4ed;border-top:3px solid #b3873c;background:#f7f9fb;text-align:center;border-radius:5px;font-size:15px}.fd-financial-fraud .fd-chain-step span{display:block;color:#b3873c}@media(max-width:767px){.fd-financial-fraud .fd-chain-grid{grid-template-columns:1fr}}<\/style>\n<div class=\"fd-financial-fraud\"><div class=\"fd-intro\"><p><strong>In cases of major financial statement misrepresentation, first dismantle six layers:<\/strong><\/p><p>1. Was the original transaction genuine?<br>2. Do the invoices, orders, shipments, and acceptance records match?<br>3. How should accounting vouchers and ledgers be recorded?<br>4. Who decides on accounting treatment and revenue recognition?<br>5. Which information is ultimately included in the legally required financial reports?<br>6. How much do each director, finance and accounting staff actually know and how much are involved?<\/p><\/div><p>When listed companies are found to have made false financial statements, prosecutors and investigators usually don&#039;t just present a single financial statement and ask questions:<\/p>\n<p>&quot;Is this number wrong?&quot;<\/p>\n<p>Real investigations often trace back to the source:<\/p>\n<p>From which order did this revenue come first?<\/p>\n<p>Are there any real customers?<\/p>\n<p>Has the goods been shipped?<\/p>\n<p>Has it been inspected and accepted?<\/p>\n<p>Why are invoices issued?<\/p>\n<p>Have the accounts receivable actually been collected?<\/p>\n<p>Did the funds get circulated back by related parties or other companies?<\/p>\n<p>Who is required to record this in the books?<\/p>\n<p>Who decides when income is recognized?<\/p>\n<p>What does a finance manager know?<\/p>\n<p>How much do directors and managers actually control?<\/p>\n<p>Finally, how is this information included in the publicly disclosed financial reports?<\/p>\n<p>Therefore, when a listed company is accused of &quot;inaccurate financial statements,&quot; the real case is usually not about a single financial statement, but rather a series of events stemming from:<\/p>\n<p><strong>Original Transaction \u2192 Accounting Vouchers \u2192 Ledgers \u2192 Financial Statements \u2192 Public Announcements<\/strong><\/p>\n<p>A chain of evidence that leads to a cohesive whole.<\/p><section class=\"fd-chain\"><h2>Chain of evidence of false financial statements<\/h2><div class=\"fd-chain-grid\"><div class=\"fd-chain-step\"><strong>Original transaction<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>vouchers\/invoices<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Accounting\/ERP<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Financial Statements<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Legally Announced\/Declared<\/strong><\/div><\/div><p>At each level, we must ask: Who made it? Who provided it? Who reviewed it? Who knew about it? Who made the decision?<\/p><\/section>\n<p>Moreover, the same case may occur simultaneously:<\/p>\n<p>Securities Exchange Law;<\/p>\n<p>Commercial Accounting Law;<\/p>\n<p>Criminal law forgery of documents;<\/p>\n<p>Special breach of trust;<\/p>\n<p>Unconventional transactions;<\/p>\n<p>Even tax and other criminal issues.<\/p>\n<p>Therefore, the first step in investigating major financial statement misrepresentation is not simply to ask:<\/p>\n<p>Is there an error in the financial statement?<\/p>\n<p>Instead, confirm first:<\/p>\n<p><strong>Which transactions are considered fraudulent, who participated, who knew about them, who made the decision, and how exactly did the fraudulent information end up in the books and financial statements?<\/strong><\/p>\n<h2>First, inaccurate accounting records in general companies and inaccurate financial statements in listed companies are not entirely the same thing.<\/h2>\n<p>This is the most important first distinction.<\/p>\n<p>Commercial accounting law applies to commercial accounting transactions and will handle:<\/p>\n<p>Accounting vouchers;<\/p>\n<p>Accounting books;<\/p>\n<p>Financial statements;<\/p>\n<p>Electronic accounting records;<\/p>\n<p>And the responsibilities of relevant business managers and accountants.<\/p>\n<p>However, if the company is a publicly traded or listed company, and its legally filed or announced financial reports and financial documents contain falsehoods or concealments, it may be subject to further legal action.<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=G0400001\" target=\"_blank\" rel=\"noopener\">Article 20 of the Securities Exchange Law<\/a>and<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=G0400001\" target=\"_blank\" rel=\"noopener\">Article 171<\/a>They will face serious criminal liability.<\/p>\n<p>so:<\/p>\n<p><strong>Commercial accounting law financial statements are inaccurate<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>Securities Exchange Law Financial Statement Inaccuracy<\/strong><\/p>\n<p>They may appear simultaneously in the same case, but the legal requirements and penalties may differ.<\/p>\n<p>The existence of inaccurate accounts does not automatically establish the validity of both laws.<\/p>\n<section class=\"fd-compare\"><h2>Business Accounting Law vs. Securities Exchange Law: Misrepresentation of Financial Statements<\/h2><div class=\"fd-compare-grid\"><div class=\"fd-compare-card\"><h3>Business Accounting Law<\/h3><p>Vouchers, ledgers, financial statements, and electronic accounting data<br>Specific responsible persons and accounting personnel<br>Articles 71, 72, and 73<\/p><\/div><div class=\"fd-compare-card\"><h3>Securities Exchange Act<\/h3><p>Financial reports submitted and announced by publicly listed\/over-the-counter companies<br>Articles 20 and 171<br>Major financial criminal liability<\/p><\/div><\/div><p>The above is for conceptual guidance only; each item should be judged according to the specific provisions and evidence of each case. Relevant provisions regarding financial reporting responsibilities can also be found in [link to relevant regulations].<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=G0400001\" target=\"_blank\" rel=\"noopener\">Article 20-1 of the Securities Exchange Act<\/a>.<\/p><\/section><h2>II. Why is the criminal liability particularly severe for falsifying financial statements under the Securities Exchange Law?<\/h2>\n<p>Article 20, Paragraph 2 of the Securities Exchange Law stipulates:<\/p>\n<p>The financial reports and financial documents that an issuer files or publishes in accordance with the Securities Exchange Act must not contain any false or concealed information.<\/p>\n<p>Violation of relevant regulations may involve Article 171, Paragraph 1, Subparagraph 1 of the Securities Exchange Act.<\/p>\n<p>The basic statutory penalty for the relevant serious crimes is as follows:<\/p>\n<p><strong>Imprisonment for a term of not less than three years but not more than ten years<\/strong><\/p>\n<p>They were also fined heavily.<\/p>\n<p>If the property or financial gain obtained through a crime exceeds NT$100 million, the statutory penalty, according to Article 171, Paragraph 2, is further increased to:<\/p>\n<p><strong>A sentence of seven years or more in prison.<\/strong><\/p>\n<p>Therefore, false financial statements by listed companies are a major financial criminal case from the very beginning.<\/p>\n<p>However, severe punishment does not necessarily mean:<\/p>\n<p>If the final financial statements are incorrect, every director, manager, or accountant is automatically guilty of a crime.<\/p>\n<p>Criminal liability must ultimately be determined by the individual defendant&#039;s conduct and subjective understanding. See related articles for further details.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-major-crimes-defense\/\">Serious Crimes and Criminal Defense under Securities Trading Law<\/a>.<\/p>\n<h2>three,<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=J0080001\" target=\"_blank\" rel=\"noopener\">Article 71 of the Commercial Accounting Act<\/a>What exactly will be punished?<\/h2>\n<p>The core issue addressed by Section 71 of the Commercial Accounting Act is the intentional falsification of accounting information by specific individuals with accounting or commercial responsibilities.<\/p>\n<p>For example, including:<\/p>\n<p>Knowing that the information is false, they still fill out accounting vouchers or record it in the books;<\/p>\n<p>Intentionally causing the loss or damage of accounting vouchers, ledgers, and statements that should be preserved;<\/p>\n<p>Forgery or alteration of accounting vouchers, accounting books and statements;<\/p>\n<p>Intentionally omitting accounting items from recording them, resulting in inaccurate financial statements;<\/p>\n<p>And other improper methods that result in false accounting matters or financial statements.<\/p>\n<p>The current statutory penalty is:<\/p>\n<p>Imprisonment for up to five years, detention, or a fine, or both.<\/p>\n<p>Therefore, the core of commercial accounting law is not:<\/p>\n<p>&quot;The accounts were made incorrectly.&quot;<\/p>\n<p>Instead:<\/p>\n<p><strong>Knowingly, intentionally, and withholding information or making false accounting entries.<\/strong><\/p>\n<p>Simple negligence and misjudgment must be distinguished from deliberate falsification. See related articles for further details.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/business-accounting-act-violations-taiwan\/\">Legal violations and evidence assessment in commercial accounting law<\/a>.<\/p>\n<p>This firm has a separate office.<a href=\"https:\/\/fdlaw.com.tw\/en\/financial-crime-defense\/\">Defense in Major Financial Criminal Cases and Financial Crimes of Listed Companies<\/a>A dedicated service page that integrates defense efforts related to searches, detention, transaction flows, and accounting documents.<\/p><div class=\"fd-cta\"><h3>Practical experience in handling false financial statements and major financial criminal cases<\/h3><p>Attorney Li Yusheng has previously given media interviews in which he publicly explained that listed companies are accused of using fake transactions to inflate revenue, involving serious criminal issues such as false financial statements and irregular transactions under the Securities and Exchange Law.<\/p><p>Fidelity Law Firm has recently been engaged again to handle a major securities transaction law criminal case involving multiple defendants, investigative detention, and a large amount of corporate, financial, transaction, and criminal evidence. Attorney Li Yusheng is involved in reviewing the case files and providing criminal defense. Due to the confidentiality of investigations and the interests of the client, the firm will not disclose the case number, the client&#039;s name, or the details of the investigation, nor does this indicate that the recent case has been found to involve financial statement misrepresentation.<\/p><p>Attorney Li Yusheng previously served as the legal director of a large accounting firm. His focus in handling financial statements and commercial accounting criminal cases was to reconnect accounting figures to the original transactions, company decisions, vouchers, and cash flows, and then analyze individual criminal liability.<\/p><p>Related cases can be handled by<a href=\"https:\/\/fdlaw.com.tw\/en\/corporate-criminal\/\">Corporate Criminal and White-Collar Criminal Lawyers<\/a>Integration and processing.<\/p><\/div><div class=\"fd-cta\"><h3>The company was searched; prosecutors have begun investigating fake transactions, revenue, and financial statements.<\/h3><p>If directors, responsible persons, chief financial officers, or accounting supervisors have received notices from the investigation bureau, summonses from the district prosecutor&#039;s office, or searches of the company, they can first compile a list of the year in question, major transactions, financial statements, books, accounting vouchers, cash flow, and their actual positions, and then confirm which transaction and which level of accounting treatment the prosecutor is questioning.<\/p><div class=\"fd-actions\"><a class=\"fd-button\" href=\"https:\/\/line.me\/ti\/p\/@723pifhz\" target=\"_blank\" rel=\"noopener\">LINE inquires about major financial statements and criminal cases<\/a><a class=\"fd-button secondary\" href=\"tel:0277093611\">Urgent criminal cases can be handled by phone directly.<\/a><\/div><\/div><h2>IV. Electronic accounting systems may also involve<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=J0080001\" target=\"_blank\" rel=\"noopener\">Article 72 of the Commercial Accounting Act<\/a><\/h2>\n<p>Nowadays, most companies&#039; accounting records are not limited to paper books.<\/p>\n<p>Instead, through:<\/p>\n<p>ERP;<\/p>\n<p>Accounting software;<\/p>\n<p>Electronic voucher;<\/p>\n<p>Cloud system;<\/p>\n<p>database<\/p>\n<p>deal with.<\/p>\n<p>Article 72 of the Commercial Accounting Act also specifically regulates the handling of accounting data electronically.<\/p>\n<p>For example:<\/p>\n<p>Intentionally logging in or entering false information;<\/p>\n<p>Intentionally damaging, destroying, or altering stored accounting records, resulting in inaccurate financial statements;<\/p>\n<p>Intentionally omitting items that should be logged in;<\/p>\n<p>Or by other improper means to make the financial statements appear false.<\/p>\n<p>Therefore, when a company is searched, it is not only paper ledgers that are seized.<\/p>\n<p>It may also include:<\/p>\n<p>ERP documentation;<\/p>\n<p>Server;<\/p>\n<p>Accounting computer;<\/p>\n<p>Electronic voucher;<\/p>\n<p>Excel;<\/p>\n<p>Email;<\/p>\n<p>System operation log.<\/p>\n<p>Evidence in major financial reporting cases is now often highly digitized. See related articles for further information.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-criminal-defense\/\">Securities trading law research, interviews, and defense in major financial criminal cases<\/a>.<\/p>\n<h2>V. The most important first step in cases of financial statement misrepresentation: Don&#039;t start with the financial statements, start with the &quot;original transactions&quot;.<\/h2>\n<p>Assuming the prosecution alleges:<\/p>\n<p>The company overstated its revenue by 200 million yuan.<\/p>\n<p>If you only look at the profit and loss statement, you will see:<\/p>\n<p>Operating revenue increased by 200 million yuan.<\/p>\n<p>But criminal defense really needs to go back further:<\/p>\n<p>From which customers did these 200 million yuan come?<\/p>\n<p>What orders are there?<\/p>\n<p>Is there a contract?<\/p>\n<p>Does the goods actually exist?<\/p>\n<p>When will it be shipped?<\/p>\n<p>Who signed for it?<\/p>\n<p>Has it been inspected and accepted?<\/p>\n<p>When will the invoice be issued?<\/p>\n<p>What are the payment terms?<\/p>\n<p>Were the accounts receivable ultimately collected?<\/p>\n<p>Have you returned the item?<\/p>\n<p>Is there a circular transaction?<\/p>\n<p>If the funds eventually return to the original owner...<\/p>\n<p>How did you get back?<\/p>\n<p>Therefore, the actual first defense document is usually not:<\/p>\n<p>&quot;Summary of Financial Statements&quot;<\/p>\n<p>Instead, it is one:<\/p>\n<p><strong>Transaction Reconstruction Table.<\/strong><\/p>\n<h2>6. What is a &quot;fake transaction&quot;? A transaction cannot be deemed nonexistent simply because it was later cancelled.<\/h2>\n<p>Cases of false financial statements frequently occur:<\/p>\n<p>Fake transactions;<\/p>\n<p>Fake sales;<\/p>\n<p>Circular transactions;<\/p>\n<p>Fictitious customers;<\/p>\n<p>Transactions involving related parties.<\/p>\n<p>However, the so-called &quot;fake transactions&quot; still require concrete proof. Further analysis of each transaction can be found in the attached document.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-sham-circular-transactions-defense\/\">Criminal defense regarding sham transactions, circular transactions, unloading and fund repatriation<\/a>.<\/p>\n<p>For example, the prosecution might argue:<\/p>\n<p>The company ostensibly sells goods to Company A;<\/p>\n<p>Company A then transfers it to Company B;<\/p>\n<p>Funds were provided by other related parties;<\/p>\n<p>Ultimately, the goods or funds return to the original company.<\/p>\n<p>This kind of transaction certainly warrants further investigation.<\/p>\n<p>But if the transaction does exist:<\/p>\n<p>There are goods available;<\/p>\n<p>There is demand;<\/p>\n<p>The contract has been fulfilled;<\/p>\n<p>Payment has been made;<\/p>\n<p>There are business risks involved.<\/p>\n<p>Later, returns or cancellations were simply due to market factors.<\/p>\n<p>We cannot conclude that the transaction was fraudulent from the beginning simply because the outcome was unsatisfactory.<\/p>\n<p>therefore:<\/p>\n<p><strong>abnormal transactions<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>The transaction did not exist.<\/strong><\/p>\n<p>They are two different levels.<\/p>\n<h2>7. Why is &quot;shipment&quot; and &quot;acceptance&quot; particularly emphasized in cases of inflated revenue?<\/h2>\n<p>When revenue can be recognized often depends on the company&#039;s transaction terms and actual performance.<\/p>\n<p>In major financial reporting cases, prosecutors may investigate:<\/p>\n<p>Delivery order;<\/p>\n<p>logistics;<\/p>\n<p>storehouse;<\/p>\n<p>Customer signs for receipt;<\/p>\n<p>acceptance;<\/p>\n<p>contract;<\/p>\n<p>Payment terms;<\/p>\n<p>return the goods;<\/p>\n<p>Whether the goods have actually been moved.<\/p>\n<p>For example:<\/p>\n<p>Invoices will be issued by the end of December;<\/p>\n<p>Revenue is recognized in the books;<\/p>\n<p>However, the goods remain in the original company&#039;s warehouse;<\/p>\n<p>The customer did not actually conduct any acceptance testing.<\/p>\n<p>The deal was even cancelled very quickly the following year.<\/p>\n<p>These facts may further fuel the investigators&#039; suspicions:<\/p>\n<p>Did the company advance or fabricate revenue for the purpose of preparing its annual financial report?<\/p>\n<p>However, the delivery terms, acceptance procedures, and revenue recognition methods differ for each industry.<\/p>\n<p>Therefore, we cannot judge crimes based solely on a single date, detached from actual contracts and business models.<\/p>\n<h2>8. Why do revolving transactions often become the core of cases involving false financial statements?<\/h2>\n<p>So-called cyclical transactions commonly occur in the following situations:<\/p>\n<p>Company A sold to Company B;<\/p>\n<p>B then sells it to C;<\/p>\n<p>Company C or other related companies then return to the related system of Company A.<\/p>\n<p>On the surface, every company has:<\/p>\n<p>Order;<\/p>\n<p>bill;<\/p>\n<p>Accounts receivable;<\/p>\n<p>Payment.<\/p>\n<p>However, the investigation will proceed further:<\/p>\n<p>Did the goods actually circulate?<\/p>\n<p>Are the funds provided from the same source?<\/p>\n<p>Do the parties to the transaction have independent business objectives?<\/p>\n<p>Did they truly bear the price and credit risks?<\/p>\n<p>Is the transaction merely for generating revenue?<\/p>\n<p>Therefore, &quot;the documents appear to be complete&quot; does not mean that there are no problems with the case.<\/p>\n<p>Conversely, we cannot automatically conclude that a transaction is fraudulent simply because the transaction chain is complex.<\/p>\n<p>The core remains:<\/p>\n<p><strong>Economic substance.<\/strong><\/p>\n<h2>9. Does the failure to disclose related-party transactions necessarily constitute criminal misrepresentation of financial statements?<\/h2>\n<p>uncertain.<\/p>\n<p>Related-party transactions are one of the important disclosure items in the financial statements of listed companies.<\/p>\n<p>However, criminal liability still needs to be specifically confirmed:<\/p>\n<p>Whether the counterparty in the transaction is indeed a related party that should be disclosed;<\/p>\n<p>Is information legally required to be disclosed?<\/p>\n<p>Does the undisclosed information constitute false or concealed financial reporting?<\/p>\n<p>Who knows about the relationship?<\/p>\n<p>Who is responsible for providing the information;<\/p>\n<p>Who decided not to disclose it;<\/p>\n<p>And the importance of related information.<\/p>\n<p>Large corporations may have a large number of:<\/p>\n<p>Subsidiaries;<\/p>\n<p>Related companies;<\/p>\n<p>Substantive control;<\/p>\n<p>Cross-relationship between directors or managers.<\/p>\n<p>Therefore, one cannot assume that people are not related simply because the company names are different;<\/p>\n<p>We also cannot conclude that all transactions are fake just because we see a relationship.<\/p>\n<h2>10. Does the chairman&#039;s signature on the financial report necessarily mean he knows about every fake transaction?<\/h2>\n<p>You can&#039;t draw that conclusion directly.<\/p>\n<p>The signature of the chairman or company head is certainly important evidence.<\/p>\n<p>However, major criminal cases still need to be investigated:<\/p>\n<p>The company&#039;s actual organization;<\/p>\n<p>Financial reporting process;<\/p>\n<p>Who is responsible for the original transaction?<\/p>\n<p>How to report financial and accounting information layer by layer;<\/p>\n<p>Did the chairman receive specific information?<\/p>\n<p>Whether or not they participated in the transactions in question;<\/p>\n<p>Did you instruct or intervene in the accounting process?<\/p>\n<p>And whether the false information reached the level of his actual knowledge.<\/p>\n<p>Large companies may include:<\/p>\n<p>Hundreds or even thousands of transactions.<\/p>\n<p>so:<\/p>\n<p><strong>Final approval responsibility in form<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>Criminal intent to know<\/strong><\/p>\n<p>These are still two problems that need to be proven separately.<\/p>\n<h2>11. Why are chief financial officers and financial managers usually the focus of investigations and prosecutions?<\/h2>\n<p>A finance manager typically possesses the following knowledge:<\/p>\n<p>funds;<\/p>\n<p>bank;<\/p>\n<p>Financial statements;<\/p>\n<p>Financing;<\/p>\n<p>Budget;<\/p>\n<p>invest;<\/p>\n<p>Major company transactions;<\/p>\n<p>Board of Directors Information.<\/p>\n<p>Therefore, if financial statement cases occur simultaneously:<\/p>\n<p>Abnormal cash flow;<\/p>\n<p>Accounts receivable;<\/p>\n<p>Related-party transactions;<\/p>\n<p>Capital repatriation;<\/p>\n<p>Corporate financing,<\/p>\n<p>The chief financial officer or finance director is likely to become the focus of an investigation.<\/p>\n<p>However, criminal liability still needs to be confirmed:<\/p>\n<p>Did he participate in the design of the transaction?<\/p>\n<p>Did you know the transaction was fraudulent?<\/p>\n<p>Is the report simply compiled based on information provided by other departments?<\/p>\n<p>Do we have the ability to verify this?<\/p>\n<p>Did any objections have been raised?<\/p>\n<p>And actual permissions.<\/p>\n<p>Professional titles alone cannot replace evidence of a crime.<\/p>\n<h2>12. How is criminal liability determined when an accounting supervisor or general accounting staff member \u201cdoes accounting according to the supervisor\u2019s instructions\u201d?<\/h2>\n<p>This is a very important issue in commercial accounting law cases.<\/p>\n<p>Accountants cannot simply because:<\/p>\n<p>&quot;My supervisor told me to do it.&quot;<\/p>\n<p>Then they are naturally exempt from liability.<\/p>\n<p>If an accountant knowingly prepares false vouchers, makes false entries, or inputs false information as instructed, they may still be subject to criminal liability under the Commercial Accounting Law.<\/p>\n<p>However, on the other hand, it cannot be solely because:<\/p>\n<p>&quot;He entered the account information.&quot;<\/p>\n<p>This leads to the conclusion that he knew the front-end transactions were fraudulent.<\/p>\n<p>For example, an accountant might only receive:<\/p>\n<p>bill;<\/p>\n<p>Acceptance documents;<\/p>\n<p>Supervisor&#039;s approval;<\/p>\n<p>Payment information<\/p>\n<p>The entries were made in accordance with the company&#039;s normal procedures.<\/p>\n<p>Therefore, it needs to be confirmed that:<\/p>\n<p>What does he know?<\/p>\n<p>Have you been in contact with the original transaction?<\/p>\n<p>Is there any reason to know that the information is inaccurate?<\/p>\n<p>Have any questions been raised?<\/p>\n<p>How should the supervisor respond?<\/p>\n<p>Are there any email or approval records?<\/p>\n<p>These factors can all influence an individual&#039;s criminal liability. Further analysis of individual roles can be found in [relevant resources\/documents].<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/cfo-accounting-officer-financial-statement-criminal-liability\/\">The individual criminal liability of the chief financial officer, accounting supervisor, and accounting staff<\/a>For related topics, please refer to [link\/reference].<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/accounting-law-lawyer\/\">The company&#039;s head was sued under the Commercial Accounting Law.<\/a>.<\/p>\n<h2>Thirteen,<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=J0080001\" target=\"_blank\" rel=\"noopener\">Article 73 of the Commercial Accounting Act<\/a>Why is it particularly important for accountants?<\/h2>\n<p>Article 73 of the Commercial Accounting Act stipulates:<\/p>\n<p>If the presiding or handling accountant or related personnel who process accounting data electronically are involved in acts under Article 71 or 72, but have expressed their refusal or raised corrective opinions in advance and have solid evidence, they may be given a reduced or exempted punishment in accordance with the law.<\/p>\n<p>Therefore, the accountant once left:<\/p>\n<p>&quot;This transaction lacks proof of shipment and cannot be recorded in the account.&quot;<\/p>\n<p>&quot;This income does not meet the recognition criteria.&quot;<\/p>\n<p>&quot;Please provide the acceptance documents.&quot;<\/p>\n<p>&quot;Information about related parties should be disclosed.&quot;<\/p>\n<p>These types of emails, messages, and approval comments,<\/p>\n<p>It can be very important in criminal cases.<\/p>\n<p>This is not an encouragement to create documents after the fact.<\/p>\n<p>On the contrary:<\/p>\n<p><strong>What is truly valuable are the original records that existed at the time.<\/strong><\/p>\n<h2>14. Completing accounting documents only after searching for them may make the situation worse.<\/h2>\n<p>After the company was searched, some people&#039;s first reaction was:<\/p>\n<p>&quot;Finish the document quickly.&quot;<\/p>\n<p>But if it didn&#039;t exist originally:<\/p>\n<p>contract;<\/p>\n<p>Acceptance form;<\/p>\n<p>Consultant report;<\/p>\n<p>Board of Directors Information;<\/p>\n<p>Accounting Instructions<\/p>\n<p>It was created after a search, and the content attempts to explain past transactions.<\/p>\n<p>The criminal risks may be higher than before.<\/p>\n<p>At this point, the most important thing is:<\/p>\n<p>Preserve the original data;<\/p>\n<p>Confirm which files already exist;<\/p>\n<p>Do not delete;<\/p>\n<p>Do not modify;<\/p>\n<p>Do not demand that employees give the same answer.<\/p>\n<p>If further explanation is needed, it should be clearly indicated as follows:<\/p>\n<p>Post-event organization or explanation<\/p>\n<p>Instead of making it look like the original document that existed at the time of the transaction.<\/p>\n<h2>15. In cases of false financial statements, &quot;bank cash flow&quot; is important, but it cannot determine the authenticity of a transaction on its own.<\/h2>\n<p>Investigators often include:<\/p>\n<p>Accounting books<\/p>\n<p>and:<\/p>\n<p>Bank statements<\/p>\n<p>Cross-comparison.<\/p>\n<p>If the account records:<\/p>\n<p>The customer paid 50 million yuan for the goods.<\/p>\n<p>However, actual bank records show:<\/p>\n<p>The funds are first provided to the client by a company representative, and then the client remits them back.<\/p>\n<p>This could be considered a major anomaly.<\/p>\n<p>But cash flow is still only part of the evidence.<\/p>\n<p>Also need to confirm:<\/p>\n<p>Funding legal relationships;<\/p>\n<p>Is it a loan?<\/p>\n<p>Transaction consideration;<\/p>\n<p>commodity;<\/p>\n<p>contract;<\/p>\n<p>Reason for payment.<\/p>\n<p>so:<\/p>\n<p><strong>There is a return of funds<\/strong><\/p>\n<p>This is a very important piece of adverse evidence.<\/p>\n<p>However, it still needs to be judged within the context of the complete transaction.<\/p>\n<h2>16. If accounts receivable remain uncollected for a long time, will it be considered that the revenue is fake?<\/h2>\n<p>uncertain.<\/p>\n<p>Normal business activities may include:<\/p>\n<p>Overdue;<\/p>\n<p>bad debt;<\/p>\n<p>The customer went bankrupt;<\/p>\n<p>Payment dispute.<\/p>\n<p>so:<\/p>\n<p>Accounts receivable not collected<\/p>\n<p>They cannot be directly equated:<\/p>\n<p>The original transaction does not exist.<\/p>\n<p>However, if both of the following occur:<\/p>\n<p>The client&#039;s financial resources are clearly insufficient;<\/p>\n<p>No proper collection efforts were made;<\/p>\n<p>No actual shipments were made;<\/p>\n<p>Transactions are highly concentrated at the end of the year;<\/p>\n<p>Accounts receivable have been outstanding for many years;<\/p>\n<p>The counterparty in the transaction is a related company;<\/p>\n<p>This could increase the investigators&#039; suspicions about the authenticity of the transaction.<\/p>\n<p>Therefore, accounts receivable need to be combined with:<\/p>\n<p>The transaction itself;<\/p>\n<p>client;<\/p>\n<p>Ability to pay;<\/p>\n<p>Debt collection;<\/p>\n<p>Follow-up processing<\/p>\n<p>Let&#039;s analyze it together.<\/p>\n<h2>17. If an accountant approves a financial statement, does that mean the company&#039;s responsible person is definitely not criminally liable?<\/h2>\n<p>uncertain.<\/p>\n<p>Auditor audits and the criminal liability of company insiders are different issues.<\/p>\n<p>External accountants typically rely on:<\/p>\n<p>The company provides the information;<\/p>\n<p>sampling;<\/p>\n<p>Verification procedures;<\/p>\n<p>Inquiry;<\/p>\n<p>Internal control<\/p>\n<p>Conduct financial report audits.<\/p>\n<p>If a company deliberately provides false documents or conceals information.<\/p>\n<p>Not just because:<\/p>\n<p>&quot;The accountant also signed it.&quot;<\/p>\n<p>Therefore, the responsibility of relevant company personnel is naturally excluded.<\/p>\n<p>Conversely, if the company does provide complete information and the accounting treatment is based on professional advice,<\/p>\n<p>Relevant records of correspondence may also serve as important evidence in determining the defendant&#039;s subjective perception.<\/p>\n<p>Therefore, it should be saved:<\/p>\n<p>The accountant inquired;<\/p>\n<p>Verification and adjustment;<\/p>\n<p>Email;<\/p>\n<p>Management Representation;<\/p>\n<p>And materials for discussing major accounting issues.<\/p>\n<h2>18. Does restating or correcting financial statements necessarily mean that the original financial statements constitute a criminal offense?<\/h2>\n<p>No, not exactly.<\/p>\n<p>The company later:<\/p>\n<p>Correcting financial statements;<\/p>\n<p>Re-editing financial statements;<\/p>\n<p>Adjustment of accounting treatment<\/p>\n<p>There could be many reasons.<\/p>\n<p>include:<\/p>\n<p>Change in accounting judgment;<\/p>\n<p>New information;<\/p>\n<p>Bug fixes;<\/p>\n<p>Requirements from the competent authority;<\/p>\n<p>Verification and adjustment.<\/p>\n<p>Inaccurate criminal financial statements still require investigation:<\/p>\n<p>Is the original content false or concealed?<\/p>\n<p>Is the error important?<\/p>\n<p>Did the relevant persons have subjective intent?<\/p>\n<p>And the actual role of each defendant.<\/p>\n<p>so:<\/p>\n<p><strong>Correction afterward<\/strong><\/p>\n<p>This is an important fact.<\/p>\n<p>But it is not the criminal conviction itself.<\/p>\n<h2>19. One of the biggest differences between false financial statements and commercial accounting law is the &quot;documentation level&quot;.<\/h2>\n<p>Major cases can be categorized into four layers of information:<\/p>\n<h3>First layer: Original vouchers<\/h3>\n<p>For example:<\/p>\n<p>bill;<\/p>\n<p>Receipt;<\/p>\n<p>contract;<\/p>\n<p>Order;<\/p>\n<p>Shipment;<\/p>\n<p>acceptance.<\/p>\n<h3>Second layer: Accounting books<\/h3>\n<p>summons;<\/p>\n<p>General ledger;<\/p>\n<p>Detailed account;<\/p>\n<p>Accounting system.<\/p>\n<h3>Third layer: Internal financial statements of the company<\/h3>\n<p>Management reports;<\/p>\n<p>Monthly report;<\/p>\n<p>Internal reports.<\/p>\n<h3>Fourth layer: Financial reports and financial documents that are declared and published in accordance with the law.<\/h3>\n<p>The Securities Exchange Act places particular emphasis on the fourth level of financial statement misrepresentation.<\/p>\n<p>Business accounting rules can have problems at every level, from the first to the third and fourth.<\/p>\n<p>Therefore, the case cannot be simply described as follows:<\/p>\n<p>&quot;The financial statements contain errors.&quot;<\/p>\n<p>It must be pointed out that:<\/p>\n<p><strong>From which layer does the error begin?<\/strong><\/p>\n<h2>20. Why are cases of major financial statement misrepresentation often handled together with irregular transactions and special breaches of trust?<\/h2>\n<p>Because some financial statements are inaccurate, which is just the result.<\/p>\n<p>There may be more above:<\/p>\n<p>Transfer of benefits to related parties;<\/p>\n<p>Fake transactions;<\/p>\n<p>Company cash outflow;<\/p>\n<p>Unreasonable asset transactions;<\/p>\n<p>Special breach of trust;<\/p>\n<p>Unconventional transactions.<\/p>\n<p>For example, a company may design a pro forma transaction in order to transfer funds to a related company;<\/p>\n<p>Then, to make the accounts more reasonable, the following was created:<\/p>\n<p>contract;<\/p>\n<p>bill;<\/p>\n<p>Accounting vouchers;<\/p>\n<p>Revenue or expense recognition.<\/p>\n<p>Therefore, cases could occur simultaneously:<\/p>\n<p>Trading crimes<\/p>\n<p>and:<\/p>\n<p>Accounting and financial statement crimes.<\/p>\n<p>Therefore, major financial cases cannot be resolved solely through defense:<\/p>\n<p>&quot;The accounting treatment is correct.&quot;<\/p>\n<p>Another question:<\/p>\n<p><strong>Whether the original transaction itself was legal.<\/strong>For related topics, please refer to<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-asset-stripping-special-breach-of-trust\/\">Hollowing out of listed companies, unconventional transactions and special breaches of trust<\/a>.<\/p>\n<h2>21. Conversely, even if a transaction is entirely genuine, there may still be accounting recognition issues.<\/h2>\n<p>This is equally important.<\/p>\n<p>A transaction might actually exist:<\/p>\n<p>There are goods available;<\/p>\n<p>There are customers;<\/p>\n<p>Payment has been made.<\/p>\n<p>But if the company:<\/p>\n<p>Early recognition;<\/p>\n<p>Incorrect classification;<\/p>\n<p>Omission of liabilities;<\/p>\n<p>Failure to disclose related parties;<\/p>\n<p>Or other significant accounting mistreatment,<\/p>\n<p>This could still lead to financial reporting issues.<\/p>\n<p>therefore:<\/p>\n<p><strong>Transaction authenticity<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>Correctness of accounting treatment<\/strong><\/p>\n<p>They are two different levels.<\/p>\n<p>Major financial reporting cases involving criminal charges require investigation at both levels.<\/p>\n<h2>22. How should a &quot;personnel responsibility matrix&quot; be used in cases of inaccurate financial statements?<\/h2>\n<p>It is usually impossible for one person to handle all the financial reporting work in a large company.<\/p>\n<p>The personnel involved can be divided into:<\/p>\n<p>business;<\/p>\n<p>purchase;<\/p>\n<p>operations;<\/p>\n<p>finance;<\/p>\n<p>Accounting;<\/p>\n<p>Chief Financial Officer;<\/p>\n<p>President;<\/p>\n<p>Chairman;<\/p>\n<p>Board of Directors;<\/p>\n<p>External accountant.<\/p>\n<p>Then mark them one by one:<\/p>\n<p>Does anyone know the original transaction?<\/p>\n<p>Who created the file?<\/p>\n<p>Who entered the data?<\/p>\n<p>Who will review it?<\/p>\n<p>Who decides on the accounting treatment?<\/p>\n<p>Who signed off on it?<\/p>\n<p>Who participated in the public announcement?<\/p>\n<p>This is how to avoid:<\/p>\n<p>Because everyone is in the same financial reporting process.<\/p>\n<p>They&#039;ve lumped everyone&#039;s criminal liability together.<\/p>\n<h2>23. A company representative&#039;s claim of &quot;not understanding accounting&quot; is not a complete defense, but it also cannot be expected that they understand every single journal entry.<\/h2>\n<p>The company&#039;s head often says:<\/p>\n<p>&quot;I don&#039;t understand accounting; that&#039;s all handled by the finance department.&quot;<\/p>\n<p>This statement alone is usually insufficient.<\/p>\n<p>Because if the case involves:<\/p>\n<p>Major company transactions;<\/p>\n<p>Board of Directors decision;<\/p>\n<p>Huge revenue;<\/p>\n<p>Related-party transactions;<\/p>\n<p>Cash flow;<\/p>\n<p>The person in charge personally participated.<\/p>\n<p>We cannot simply use:<\/p>\n<p>&quot;I don&#039;t know anything about accounting.&quot;<\/p>\n<p>Avoid all problems.<\/p>\n<p>But conversely,<\/p>\n<p>It is also unreasonable to expect someone to have actual knowledge of all of the company&#039;s thousands of accounting entries simply because they are the chairman or general manager.<\/p>\n<p>What we really need to see is:<\/p>\n<p><strong>Does this specific inaccurate matter fall within his actual information and decision-making scope?<\/strong><\/p>\n<h2>24. Before the Investigation Bureau conducts an interview, what six types of information should be prepared?<\/h2>\n<p>If you have already received notification from the Investigation Bureau or the District Prosecutor&#039;s Office regarding a major financial reporting case, you can first prepare the following:<\/p>\n<p>Category 1:<br>Subpoenas, notices, search warrants, and lists of seized items.<\/p>\n<p>Category Two:<br>The annual financial report and related financial documents involved in the case.<\/p>\n<p>Category 3:<br>The prosecution may focus on key transaction contracts, orders, shipments, and acceptances.<\/p>\n<p>Category 4:<br>Invoices, vouchers, general ledgers, subsidiary ledgers, and ERP data.<\/p>\n<p>Category 5:<br>Data on bank cash flow, accounts receivable, payments, and cash inflows.<\/p>\n<p>Category 6:<br>Board of Directors, internal approvals, emails, correspondence with accountants, and division of labor.<\/p>\n<p>Do not bring all company information to the interview without screening.<\/p>\n<p>First, we should determine:<\/p>\n<p>The prosecution is truly focused on which year, which transaction, and which crime. See relevant articles for further discussion.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/company-investigation-bureau-summons-search\/\">Company executives summoned by the investigation bureau or company searched<\/a>.<\/p>\n<h2>25. One of the most dangerous things about taking a first statement is guessing accounting questions when there are no documents available.<\/h2>\n<p>Major financial reporting cases may trace back to transactions from several years ago.<\/p>\n<p>The investigator might ask:<\/p>\n<p>Why was revenue recognized for this transaction in the month ending December 31, 2019?<\/p>\n<p>If the party involved does not have:<\/p>\n<p>contract;<\/p>\n<p>Financial statements;<\/p>\n<p>Transaction data<\/p>\n<p>Before our eyes,<\/p>\n<p>But he answered from memory:<\/p>\n<p>&quot;It must be because it has already been shipped.&quot;<\/p>\n<p>Later, the documentation showed that the actual shipping date was different.<\/p>\n<p>This will lead to contradictions in the written records.<\/p>\n<p>Therefore, when encountering complex accounting or transaction issues that require documentation for confirmation,<\/p>\n<p>The more correct approach is usually to clearly state:<\/p>\n<p>I need to see the information to confirm.<\/p>\n<p><strong>If you don&#039;t know, don&#039;t guess.<\/strong><\/p>\n<h2>26. Cases involving falsified financial statements may quickly lead to detention proceedings after a search.<\/h2>\n<p>If the case involves:<\/p>\n<p>Multiple people;<\/p>\n<p>Listed companies;<\/p>\n<p>A large amount of electronic data;<\/p>\n<p>Significant amounts;<\/p>\n<p>Long-term fake transactions;<\/p>\n<p>Article 171 of the Securities Exchange Law,<\/p>\n<p>The prosecutor may further argue:<\/p>\n<p>Serial certificates;<\/p>\n<p>Destroy evidence;<\/p>\n<p>escape<\/p>\n<p>Risks of detention, etc.<\/p>\n<p>Therefore, after being searched, one should not:<\/p>\n<p>Delete data;<\/p>\n<p>Re-create documents;<\/p>\n<p>Contact other defendants to discuss their statements;<\/p>\n<p>Employees are required to give the same answer.<\/p>\n<p>If the swearing process has already begun, it should be handled separately:<\/p>\n<p>Has the evidence been seized?<\/p>\n<p>Which witnesses have been questioned?<\/p>\n<p>Does the defendant still have control over the company&#039;s personnel?<\/p>\n<p>Are there alternative detention options?<\/p>\n<p>Defenses against financial statement misrepresentation and defenses against detention should be conducted concurrently. See relevant articles for further details.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-detention-hearing\/\">Detention and Custody Court Battles in Securities Trading Law Cases<\/a>.<\/p>\n<h2>27. This information is very important if there are already people within the company who oppose the accounting treatment.<\/h2>\n<p>For example, an accountant, finance professional, or someone else may have left behind:<\/p>\n<p>&quot;This entry cannot be accepted.&quot;<\/p>\n<p>&quot;No proof of shipment.&quot;<\/p>\n<p>&quot;This person with this connection should be exposed.&quot;<\/p>\n<p>&quot;Incomplete information&quot;.<\/p>\n<p>&quot;The financial statements should be adjusted.&quot;<\/p>\n<p>These original emails, approvals, or messages<\/p>\n<p>This may help the court understand:<\/p>\n<p>Not everyone within the company shares the same understanding.<\/p>\n<p>Especially for accountants who may be affected by Section 73 of the Commercial Accounting Act,<\/p>\n<p>Conclusive evidence of prior rejection or correction of an opinion may have direct legal significance.<\/p>\n<p>Therefore, do not only organize unfavorable documents.<\/p>\n<p><strong>Original records of any objections raised should also be retained.<\/strong><\/p>\n<h2>28. The real defense in cases of major financial misrepresentation is not about finding someone to take the blame.<\/h2>\n<p>This is a common occurrence in multi-person financial criminal cases:<\/p>\n<p>The board member said it was for finance;<\/p>\n<p>Finance is called accounting;<\/p>\n<p>The accountant said it was a business transaction;<\/p>\n<p>The business manager said it was the supervisor.<\/p>\n<p>This kind of separation usually doesn&#039;t really solve the case.<\/p>\n<p>A more effective approach is to allocate each person&#039;s:<\/p>\n<p>information;<\/p>\n<p>Permissions;<\/p>\n<p>Work;<\/p>\n<p>Behavior;<\/p>\n<p>Subjective cognition<\/p>\n<p>separate.<\/p>\n<p>It&#039;s possible that someone was indeed in charge of the transaction;<\/p>\n<p>Someone is in charge of accounting;<\/p>\n<p>Some people are only responsible for the final approval;<\/p>\n<p>Some people have never even come across the relevant information.<\/p>\n<p>Criminal liability must be individualized.<\/p>\n<h2>29. Attorney Li Yusheng has previously publicly explained cases involving listed companies inflating revenue and falsifying financial statements.<\/h2>\n<p>Attorney Li Yusheng has previously given media interviews, providing legal explanations on issues such as listed companies being accused of using fake transactions to inflate revenue, and issues involving false financial statements and irregular transactions under the Securities and Exchange Law.<\/p>\n<p>The fact that this case was made public itself shows that:<\/p>\n<p>Cases of significant financial misstatement usually involve more than one financial report.<\/p>\n<p>It will also involve:<\/p>\n<p>Fake transactions;<\/p>\n<p>Related companies;<\/p>\n<p>Income recognition;<\/p>\n<p>Company head;<\/p>\n<p>Finance Manager;<\/p>\n<p>Investigative searches;<\/p>\n<p>Multiple people were interviewed;<\/p>\n<p>Article 171 of the Securities Exchange Act.<\/p>\n<p>Therefore, the defense in financial statement criminal cases must be understood simultaneously:<\/p>\n<p>Accounting;<\/p>\n<p>Company transactions;<\/p>\n<p>Cash flow;<\/p>\n<p>Securities Law;<\/p>\n<p>And criminal procedures. See relevant articles for further information.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/financial-statement-fraud\/\">Legal Explanation by Attorney Li Yusheng Regarding Inaccurate Past Financial Reports in the Media<\/a>.<\/p>\n<h2>30. Recent major securities trading law cases have further strengthened our experience in handling major financial criminal cases.<\/h2>\n<p>Fidelity Law Firm has recently been appointed again to handle a major securities transaction law criminal case involving multiple defendants, investigative detention, and a large amount of corporate, financial, transaction, and criminal case files. Attorney Li Yusheng is involved in reviewing the files and providing criminal defense.<\/p>\n<p>Based on the principles of non-disclosure of investigations, protection of the parties&#039; privacy, and safeguarding the interests of the defense, this firm will not disclose the case number, the name of the appointor, or the specific details of the investigation that have not yet been made public.<\/p>\n<p>The information currently available does not imply that the case has been determined to involve financial misrepresentation, and our firm will not use the details of undetermined cases for publicity.<\/p>\n<p>However, the common methods for handling major financial criminal cases must be mastered simultaneously:<\/p>\n<p>Company decision-making;<\/p>\n<p>Financial accounting;<\/p>\n<p>Original transaction;<\/p>\n<p>Cash flow;<\/p>\n<p>Securities Law;<\/p>\n<p>Search and detention;<\/p>\n<p>And document analysis.<\/p>\n<p>Attorney Li Yusheng, formerly the legal director of a large accounting firm, when handling criminal cases involving financial statements and commercial accounting, would first return to the actual transactions and accounting processes before conducting an analysis of the elements constituting a criminal offense, rather than simply looking at the last financial report.<\/p>\n<h2>Financial Statement Misstatements and Business Accounting Law FAQ<\/h2>\n<details><summary>Does a company&#039;s financial statements necessarily violate commercial accounting laws if they contain errors?<\/summary><p>Not necessarily. Articles 71 and 72 of the Commercial Accounting Law stipulate that the relevant conduct subject to penalties requires knowledge or intent. Simple accounting errors, estimation mistakes, or disputes over professional judgment cannot be directly equated with intentionally creating false accounting information.<\/p><\/details>\n<details><summary>If a listed company submits inaccurate financial reports, will both the Commercial Accounting Act and the Securities Exchange Act apply simultaneously?<\/summary><p>It is possible for a case to be subject to different legal scrutiny simultaneously, but it is not automatically established at the same time. It is still necessary to separately confirm the conduct of the actors, documents, or books required by the Commercial Accounting Act, and the false or concealed financial reporting and personal criminal liability required by Articles 20 and 171 of the Securities and Exchange Act.<\/p><\/details>\n<details><summary>Can an accountant be criminally liable simply for entering data according to their supervisor&#039;s instructions?<\/summary><p>It remains to be seen whether the accountants were aware of the falsification of the information and the extent of their actual involvement. Article 73 of the Commercial Accounting Law further stipulates that qualified lead or handling accountants or personnel involved in electronic data processing may have their sentences reduced or exempted if they had previously expressed their refusal or offered corrections and there is solid evidence.<\/p><\/details>\n<details><summary>Does the chairman of the board have to be criminally liable for all fraudulent transactions when he signs financial statements?<\/summary><p>Not necessarily. Signatures are important evidence, but it is still necessary to confirm whether the chairman was actually aware that the relevant transactions were false, whether he participated in the decision-making or instructed the accounting treatment, and whether the information in question was within his actual control.<\/p><\/details>\n<details><summary>Does the fact that a company has actually shipped goods mean that its financial statements are not inaccurate?<\/summary><p>Not necessarily. The authenticity of a transaction and the accuracy of accounting recognition are different levels. Even if the transaction itself exists, issues such as the timing of revenue recognition, related-party disclosures, or other financial reporting problems may still arise.<\/p><\/details>\n<details><summary>Does the subsequent restatement of financial statements necessarily indicate that there was originally a criminal offense?<\/summary><p>Not necessarily. Financial statement restatements or corrections may stem from reasons such as error correction, accounting judgments, or requirements from regulatory authorities. Criminal liability still requires proof that the original financial statements contained falsifications or concealments as required by law, as well as the subjective intent of the individuals involved.<\/p><\/details>\n<details><summary>What is the most important evidence in a case of fraudulent transactions?<\/summary><p>You can&#039;t usually rely on just one document. Contracts, orders, shipments, acceptances, invoices, accounting vouchers, bank statements, accounts receivable, emails, internal approvals, and transaction partner information can all collectively determine whether a transaction has real economic substance.<\/p><\/details>\n<details><summary>After the company is searched, can you quickly fill in the missing documents?<\/summary><p>Documents should not be created or reconstructed to appear to have already existed. Original documents should be preserved first, and the documents at the time of the transaction should be distinguished from the subsequent compilation and explanation to avoid the risk of new destruction, forgery, or collusion of evidence due to the creation or modification of documents.<\/p><\/details>\n<\/div>\n\n<section class=\"fdlaw-related-posts\"><h2 class=\"fdlaw-related-posts__title\">Further reading<\/h2><div class=\"fdlaw-related-posts__grid\"><a class=\"fdlaw-related-card\" href=\"https:\/\/fdlaw.com.tw\/en\/blog\/business-accounting-act-violations-taiwan\/\"><div class=\"fdlaw-related-card__image\"><img width=\"585\" height=\"365\" src=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/08\/messageImage_1786113155572.jpg\" class=\"attachment-medium_large size-medium_large wp-post-image\" alt=\"\" loading=\"lazy\" decoding=\"async\" sizes=\"auto, (max-width: 767px) calc(100vw - 40px), (max-width: 1100px) 45vw, 520px\" srcset=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/08\/messageImage_1786113155572.jpg 585w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/08\/messageImage_1786113155572-300x187.jpg 300w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/08\/messageImage_1786113155572-18x12.jpg 18w\" title=\"\"><\/div><div class=\"fdlaw-related-card__body\"><h3 class=\"fdlaw-related-card__title\">What are the common violations of commercial accounting law? A comprehensive overview of everything from falsified accounting vouchers and ledgers to inaccurate financial statements.<\/h3><p class=\"fdlaw-related-card__excerpt\">The core of commercial accounting law cases is not simply &quot;mistaken accounting constitutes a crime,&quot; but rather determining whether accounting vouchers, ledgers, or financial statements do not reflect actual transactions, and whether relevant personnel knowingly created, recorded, used, or intentionally omitted false information. Whether the company&#039;s responsible person, accountant, or personnel entrusted with handling accounting matters bear criminal responsibility\u2026<\/p><span class=\"fdlaw-related-card__more\">Read the full article \u2192<\/span><\/div><\/a><a class=\"fdlaw-related-card\" href=\"https:\/\/fdlaw.com.tw\/en\/blog\/financial-statement-fraud\/\"><div class=\"fdlaw-related-card__image\"><img width=\"768\" height=\"437\" src=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840-768x437.jpg\" class=\"attachment-medium_large size-medium_large wp-post-image\" alt=\"\" loading=\"lazy\" decoding=\"async\" sizes=\"auto, (max-width: 767px) calc(100vw - 40px), (max-width: 1100px) 45vw, 520px\" srcset=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840-768x437.jpg 768w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840-300x171.jpg 300w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840-1024x583.jpg 1024w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840-1536x874.jpg 1536w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2023\/06\/S__18038840.jpg 1697w\" title=\"\"><\/div><div class=\"fdlaw-related-card__body\"><h3 class=\"fdlaw-related-card__title\">Lawyer Li Yusheng, the chairman of Zhaojin Technology, which &quot;raised hundreds of millions of dollars in revenue,&quot; posted an 8 million bail, explained legal issues related to securities trading laws and false financial reports.<\/h3><p class=\"fdlaw-related-card__excerpt\">https:\/\/youtu.be\/0kEe4zEfZBA Zhaojin Technology &quot;Inflates Revenue by Hundreds of Millions,&quot; Chairman Released on Bail of 8 Million | CTS News Reporter Zheng Huiliang News Link: https:\/\/youtu.be\/0kEe4zEfZBA Once a recipient of the &quot;National Quality Award&quot;...<\/p><span class=\"fdlaw-related-card__more\">Read the full article \u2192<\/span><\/div><\/a><a class=\"fdlaw-related-card\" href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-major-crimes-defense\/\"><div class=\"fdlaw-related-card__image\"><img width=\"768\" height=\"429\" src=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-768x429.jpeg\" class=\"attachment-medium_large size-medium_large wp-post-image\" alt=\"\" loading=\"lazy\" decoding=\"async\" sizes=\"auto, (max-width: 767px) calc(100vw - 40px), (max-width: 1100px) 45vw, 520px\" srcset=\"https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-768x429.jpeg 768w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-300x167.jpeg 300w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-1024x572.jpeg 1024w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-1536x857.jpeg 1536w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-2048x1143.jpeg 2048w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_mocx2fmocx2fmocx-18x10.jpeg 18w\" title=\"\"><\/div><div class=\"fdlaw-related-card__body\"><h3 class=\"fdlaw-related-card__title\">What to do if someone is suspected of stock price manipulation, insider trading, falsifying financial statements, or committing special breach of trust? First, analyze the elements of the crime and the evidence.<\/h3><p class=\"fdlaw-related-card__excerpt\">Major criminal cases under securities trading law should not be lumped together with all charges: False financial statements \u2192 Original transaction, financial process, informed and intentional stock price manipulation \u2192 Account control, order placement patterns, funds, price and market intent \u2192 Insider trading \u2192 Material news, specific timing, time of knowledge and trading time \u2192 Unconventional trading \u2192 Commercial purpose, trading\u2026<\/p><span class=\"fdlaw-related-card__more\">Read the full article \u2192<\/span><\/div><\/a><\/div><\/section>\n\n\n<div class=\"fd-financial-fraud\"><h2>The real question that cases of false financial statements need to answer is, &quot;How does false information get into financial statements?&quot;<\/h2>\n<p>Major financial statement criminal cases are not just about asking:<\/p>\n<p>Are there any errors in the financial statements?<\/p>\n<p>What truly needs rebuilding is:<\/p>\n<p>Was the original transaction genuine?<\/p>\n<p>Where do the vouchers come from?<\/p>\n<p>Who requested the entry?<\/p>\n<p>How should the accountant handle this?<\/p>\n<p>Who will review it?<\/p>\n<p>Who knows;<\/p>\n<p>Who signed off on it;<\/p>\n<p>And ultimately, which information is reported or announced to the market.<\/p>\n<p>Only by:<\/p>\n<p>trade;<\/p>\n<p>certificate;<\/p>\n<p>Account books;<\/p>\n<p>Financial statements;<\/p>\n<p>Cash flow;<\/p>\n<p>Personnel Roles<\/p>\n<p>Connected into a single chain of evidence,<\/p>\n<p>Only then can one truly judge:<\/p>\n<p>Articles 71 and 72 of the Commercial Accounting Act;<\/p>\n<p>Articles 20 and 171 of the Securities Exchange Act;<\/p>\n<p>And whether other criminal liabilities have been established.<\/p>\n<p>If the company has been searched by the investigation bureau, received a subpoena, or its directors, CFO, and accounting manager have been interviewed, the company should first organize the relevant year, major transactions, accounting processes, cash flow, and existing documents, and then confirm the financial report content and individual roles that the prosecution is truly questioning.<\/p><div class=\"fd-cta\"><h2>In cases of financial statement misrepresentation, one cannot simply respond with &quot;this was done by the accountant&quot; or &quot;the financial statements were signed by the accountant.&quot;<\/h2><p>Major financial reporting criminal cases must be reconstructed layer by layer, starting from the original transactions, shipments, acceptance, invoices, ledgers, ERP systems, financial reports, bank flows, and personnel division of labor. If the parties involved have already been searched, questioned, detained, or prosecuted, the relevant transaction and accounting data can be compiled first, and then the actual elements of the crime faced by each party can be confirmed.<\/p><div class=\"fd-actions\"><a class=\"fd-button\" href=\"https:\/\/line.me\/ti\/p\/@723pifhz\" target=\"_blank\" rel=\"noopener\">LINE inquires about major financial statements and criminal cases<\/a><a class=\"fd-button secondary\" href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-criminal-defense\/\">Defense in Major Financial Criminal Cases Related to Securities Trading Law<\/a><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"<p>\u91cd\u5927\u8ca1\u5831\u4e0d\u5be6\u6848\u4ef6\uff0c\u5148\u62c6\u516d\u5c64\uff1a 1. \u539f\u59cb\u4ea4\u6613\u5230\u5e95\u771f\u4e0d\u771f\u5be6\uff1b2. \u767c\u7968\u3001\u8a02\u55ae\u3001\u51fa\u8ca8\u8207\u9a57\u6536\u662f\u5426\u76f8\u7b26\uff1b3. \u6703\u8a08\u6191\u8b49 [&hellip;]<\/p>","protected":false},"author":4,"featured_media":12578,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","footnotes":""},"categories":[77,136],"tags":[],"class_list":["post-12568","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taipei-criminal-lawyer","category-commercial-law"],"blocksy_meta":[],"qubely_featured_image_url":{"full":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-scaled.jpeg",2560,1429,false],"landscape":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1200x750.jpeg",1200,750,true],"portraits":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-540x320.jpeg",540,320,true],"thumbnail":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-150x150.jpeg",150,150,true],"medium":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-300x167.jpeg",300,167,true],"medium_large":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-768x429.jpeg",768,429,true],"large":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1024x572.jpeg",1024,572,true],"1536x1536":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1536x857.jpeg",1536,857,true],"2048x2048":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-2048x1143.jpeg",2048,1143,true],"trp-custom-language-flag":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-18x10.jpeg",18,10,true],"qubely_landscape":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1200x750.jpeg",1200,750,true],"qubely_portrait":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-540x320.jpeg",540,320,true],"qubely_thumbnail":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-140x100.jpeg",140,100,true]},"qubely_author":{"display_name":"\u674e\u80b2\u6607\u5f8b\u5e2b","author_link":"https:\/\/fdlaw.com.tw\/en\/author\/charles-lee\/"},"qubely_comment":0,"qubely_category":"<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/category\/taipei-criminal-lawyer\/\" rel=\"category tag\">\u5211\u6cd5\u53ca\u5211\u4e8b\u8a34\u8a1f<\/a> <a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/category\/commercial-law\/\" rel=\"category tag\">\u5546\u6cd5<\/a>","qubely_excerpt":"\u91cd\u5927\u8ca1\u5831\u4e0d\u5be6\u6848\u4ef6\uff0c\u5148\u62c6\u516d\u5c64\uff1a 1. \u539f\u59cb\u4ea4\u6613\u5230\u5e95\u771f\u4e0d\u771f\u5be6\uff1b2. \u767c\u7968\u3001\u8a02\u55ae\u3001\u51fa\u8ca8\u8207\u9a57\u6536\u662f\u5426\u76f8\u7b26\uff1b3. \u6703\u8a08\u6191\u8b49&hellip;","_links":{"self":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12568","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/comments?post=12568"}],"version-history":[{"count":4,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12568\/revisions"}],"predecessor-version":[{"id":12613,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12568\/revisions\/12613"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/media\/12578"}],"wp:attachment":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/media?parent=12568"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/categories?post=12568"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/tags?post=12568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}