{"id":12579,"date":"2026-10-09T20:48:31","date_gmt":"2026-10-09T12:48:31","guid":{"rendered":"https:\/\/fdlaw.com.tw\/?p=12579"},"modified":"2026-10-10T11:32:58","modified_gmt":"2026-10-10T03:32:58","slug":"listed-company-sham-circular-transactions-defense","status":"publish","type":"post","link":"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-sham-circular-transactions-defense\/","title":{"rendered":"What should a company do if it is accused of fake transactions, circular transactions, or inflating revenue? First, reconstruct the shipment, receipt, payment, and cash flow records."},"content":{"rendered":"<style>.fd-circular-transactions{color:#293746;line-height:1.9}.fd-circular-transactions *{box-sizing:border-box}.fd-circular-transactions p{margin:0 0 18px;font-size:17px;line-height:1.9}.fd-circular-transactions 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-circular-transactions h3{margin:24px 0 10px;color:#173a5e;font-size:19px;line-height:1.5;font-weight:700}.fd-circular-transactions .fd-intro{margin:0 0 30px;padding:22px 24px;border-left:4px solid #b3873c;border-radius:5px;background:#f2f6f9}.fd-circular-transactions .fd-intro p:last-child{margin-bottom:0}.fd-circular-transactions .fd-period{display:block;padding:18px 20px;border-left:4px solid #b3873c;background:#f2f5f8;color:#173a5e}.fd-circular-transactions .fd-cta{margin:30px 0;padding:22px 24px;border:1px solid #d8c49e;border-radius:6px;background:#fffaf1}.fd-circular-transactions .fd-cta h2,.fd-circular-transactions .fd-cta h3{margin:0 0 16px;padding:0;border:0;background:none}.fd-circular-transactions a{text-decoration:underline;text-underline-offset:3px}.fd-circular-transactions .fd-actions{display:flex;flex-wrap:wrap;gap:12px}.fd-circular-transactions .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-circular-transactions .fd-button.secondary{background:#fff;border:1px solid #173a5e;color:#173a5e}@media(max-width:720px){.fd-circular-transactions p{font-size:16px}.fd-circular-transactions h2{margin-top:32px;padding:13px 15px;font-size:21px}.fd-circular-transactions h3{font-size:18px}.fd-circular-transactions .fd-intro,.fd-circular-transactions .fd-cta{padding:20px 18px}.fd-circular-transactions .fd-button{width:100%}}.fd-circular-transactions details{border:1px solid #dde5ed;border-radius:6px;background:#fff;margin:0 0 12px;padding:16px 20px}.fd-circular-transactions summary{cursor:pointer;font-weight:700;color:#173a5e;line-height:1.6}.fd-circular-transactions details p{margin:14px 0 0}.fd-circular-transactions .fd-case-image{margin:24px auto;max-width:472px}.fd-circular-transactions .fd-case-image img{display:block;width:100%;height:auto}.fd-circular-transactions .fd-case-image figcaption{font-size:14px;text-align:center;color:#526475;margin-top:10px}.fd-circular-transactions .fd-compare{margin:28px 0}.fd-circular-transactions .fd-compare-grid{display:grid;grid-template-columns:repeat(2,minmax(0,1fr));gap:16px;margin-bottom:16px}.fd-circular-transactions .fd-compare-card{border:1px solid #dce4ed;border-top:3px solid #b3873c;border-radius:5px;background:#f7f9fb;padding:20px}.fd-circular-transactions .fd-compare-card h3{margin:0 0 10px}.fd-circular-transactions .fd-compare-card p{margin:0}@media(max-width:767px){.fd-circular-transactions .fd-compare-grid{grid-template-columns:1fr}}.fd-circular-transactions .fd-chain-grid{display:grid;grid-template-columns:repeat(5,minmax(0,1fr));gap:8px;margin:18px 0}.fd-circular-transactions .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-circular-transactions .fd-chain-step span{display:block;color:#b3873c}@media(max-width:767px){.fd-circular-transactions .fd-chain-grid{grid-template-columns:1fr}}<\/style>\n<div class=\"fd-circular-transactions\"><div class=\"fd-intro\"><p><strong>If accused of fraudulent transactions or inflated revenue, investigate five lines of investigation first:<\/strong><\/p><p>1. Whether the goods or services were actually fulfilled;<br>2. Are the order, shipment, acceptance, and invoice records consistent with each other?<br>3. Where did the funds for customer payments originally come from?<br>4. Have the funds, goods, or benefits been returned?<br>5. Who decides on the transaction, who decides on the deposit, and who actually knows about the anomaly?<\/p><\/div><p>In cases of major financial misrepresentation, &quot;fake transactions,&quot; &quot;circular transactions,&quot; and &quot;inflated revenue&quot; are the terms most frequently used by prosecutors and investigators, and are also the ones that most easily make the parties involved nervous.<\/p>\n<p>However, from a criminal law perspective, these terms themselves are not the final step in establishing a crime.<\/p>\n<p>What really needs to be investigated is:<\/p>\n<p>Does the transaction have a genuine business purpose?<\/p>\n<p>Does the customer actually exist?<\/p>\n<p>Has the product been shipped?<\/p>\n<p>Is the service provided?<\/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>Where does the money for the payment come from?<\/p>\n<p>Did the funds later return to the original company or related parties?<\/p>\n<p>Why does the accountant recognize the expense in this period?<\/p>\n<p>Finally, how do these transactions get included in the financial reports that are legally required to be filed or announced?<\/p>\n<p>Therefore, the first step in handling major fraudulent transaction cases is usually not to argue that:<\/p>\n<p>&quot;The deal is real.&quot;<\/p>\n<p>Instead, the entire transaction was redrawn from beginning to end:<\/p>\n<p><strong>Order \u2192 Contract \u2192 Shipment\/Fulfillment \u2192 Acceptance \u2192 Invoice \u2192 Accounting \u2192 Accounts Receivable \u2192 Payment Collection \u2192 Financial Statement<\/strong><\/p><section class=\"fd-chain\"><h2>Five lines of evidence of fake transactions<\/h2><div class=\"fd-chain-grid\"><div class=\"fd-chain-step\"><strong>Transaction\/Contract<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Goods\/Services<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Invoices \/ Accounting<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Bank cash flow<\/strong><span aria-hidden=\"true\">\u2193<\/span><\/div><div class=\"fd-chain-step\"><strong>Financial Reports<\/strong><\/div><\/div><\/section>\n<p>If any of these steps show abnormalities, the investigation team may further suspect:<\/p>\n<p>This is a real transaction.<\/p>\n<p>Or is it a formal transaction designed to generate revenue, profit, or financial statement figures? See related articles for further discussion.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-financial-statement-fraud-defense\/\">Defense against listed companies for false financial statements, fraudulent transactions, and commercial accounting laws<\/a>.<\/p>\n<h2>I. What is meant by &quot;fake transaction&quot; in criminal cases?<\/h2>\n<p>&quot;Fake transactions&quot; is not a crime specifically named under the Securities Exchange Act or the Business Accounting Act.<\/p>\n<p>It typically describes a state of fact:<\/p>\n<p>There are transaction documents on the surface.<\/p>\n<p>However, the economic substance does not exist or is inconsistent with the content of the document.<\/p>\n<p>For example:<\/p>\n<p>There were no goods at all;<\/p>\n<p>No service was provided at all;<\/p>\n<p>The buyer is merely a nominal company;<\/p>\n<p>The goods were not actually transferred;<\/p>\n<p>The buyer lacks the actual ability to pay;<\/p>\n<p>The payment funds were actually provided by the seller or a related party;<\/p>\n<p>After the transaction is completed, the goods, funds, or profits return to the original system.<\/p>\n<p>Some documents are even created solely so that accountants can record them.<\/p>\n<p>These situations may further involve:<\/p>\n<p><a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=G0400001\" target=\"_blank\" rel=\"noopener\">Securities Exchange Act<\/a>The financial statements are inaccurate;<\/p>\n<p>Commercial Accounting Law;<\/p>\n<p>Unconventional transactions;<\/p>\n<p>Special breach of trust;<\/p>\n<p>Or other crimes.<\/p>\n<p>However, a true legal judgment must still be made based on each specific act. (Related topics can be found in the [reference needed] section.)<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>Second, a large number of documents does not necessarily mean the transaction is genuine.<\/h2>\n<p>A common scenario in major financial cases:<\/p>\n<p>The transaction details appear to be very complete.<\/p>\n<p>have:<\/p>\n<p>Purchase order;<\/p>\n<p>Sales order;<\/p>\n<p>contract;<\/p>\n<p>bill;<\/p>\n<p>Delivery order;<\/p>\n<p>Acceptance form;<\/p>\n<p>Bank transfer;<\/p>\n<p>Accounting voucher.<\/p>\n<p>On the surface, it appears that every step is documented.<\/p>\n<p>But prosecutors will still ask:<\/p>\n<p>Do these documents reflect real transactions?<\/p>\n<p>For example:<\/p>\n<p>The shipping order shows a record, but the warehouse never actually shipped anything.<\/p>\n<p>The acceptance form was signed, but the customer never received the goods.<\/p>\n<p>The funds were indeed transferred to the company, but the source of the funds was actually provided in advance by the same group;<\/p>\n<p>The invoice exists, but there are no corresponding goods or services.<\/p>\n<p>so:<\/p>\n<p><strong>Complete formal documentation<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>The transaction has real economic substance<\/strong><\/p>\n<p>These are still two different issues.<\/p>\n<h2>Thirdly, conversely, incomplete documentation does not necessarily mean the transaction is fraudulent.<\/h2>\n<p>In reality, not every transaction a business makes is perfect.<\/p>\n<p>Especially:<\/p>\n<p>Long-term cooperative clients;<\/p>\n<p>Group companies;<\/p>\n<p>Urgent shipment;<\/p>\n<p>Complete the work first, then add the documentation later;<\/p>\n<p>Overseas transactions;<\/p>\n<p>Customized services;<\/p>\n<p>There may be instances where the document process is incomplete.<\/p>\n<p>For example:<\/p>\n<p>There was no formal paper contract;<\/p>\n<p>However, they have a long-term email relationship;<\/p>\n<p>There have been actual shipments;<\/p>\n<p>The customer has made payment;<\/p>\n<p>The product is indeed in use;<\/p>\n<p>Both parties have had similar transaction patterns in the past.<\/p>\n<p>This situation cannot be due to:<\/p>\n<p>&quot;No formal contract found&quot;<\/p>\n<p>The transaction is then deemed nonexistent.<\/p>\n<p>Criminal cases should be examined in terms of the overall evidence.<\/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 Statement Crimes<\/a>A dedicated service page that integrates defense efforts related to searches, detention, transaction flows, and accounting documents.<\/p><div class=\"fd-cta\"><h3>Criminal handling experience of companies involved in cases of fraudulent transactions and misrepresentation of financial statements<\/h3><p>Attorney Li Yusheng has previously given media interviews, publicly explaining major financial and criminal issues such as listed companies being accused of inflating revenue through fictitious transactions and falsifying financial statements under the Securities and Exchange Law.<\/p><p>Fidelity Law Firm has recently been taken on another major securities transaction law criminal case, with Attorney Li Yusheng participating in the review of case files and criminal defense. The case involves multiple defendants, detention, and a large amount of corporate financial and transaction evidence; due to the need for confidentiality in investigations and the interests of the clients, the firm will not disclose the case number, names, or undisclosed details, nor does this indicate that the recently taken-on case has been determined to involve fraudulent transactions.<\/p><p>The key to handling major fraudulent transaction cases is to reconnect formal documents to the actual flow of goods, funds, accounting practices, and company decisions, rather than just looking at the final figures on the financial statements.<\/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 investigation team has begun investigating whether the transactions were fraudulent, circular, or revenue was inflated.<\/h3><p>If your company is searched, or your chairman, CFO, business manager, or accountant has been questioned, you can first compile a list of the main transactions, shipments and receipts, invoices, accounts receivable, bank transactions, and actual positions that the prosecutors are questioning, and then verify the authenticity of each transaction and the accounting treatment.<\/p><div class=\"fd-actions\"><a class=\"fd-button\" href=\"https:\/\/line.me\/ti\/p\/@723pifhz\" target=\"_blank\" rel=\"noopener\">LINE Inquiries about Major Financial 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. What is &quot;circular trading&quot;?<\/h2>\n<p>Circulating transactions typically refer to transactions or funds circulating among several companies.<\/p>\n<p>For example:<\/p>\n<p>Company A sells goods to Company B;<\/p>\n<p>B then sells it to C;<\/p>\n<p>C then sells back to A or a related company of A.<\/p>\n<p>or:<\/p>\n<p>Company A first provides funds to Company B;<\/p>\n<p>B then uses this money to pay A for the goods;<\/p>\n<p>Therefore, A generates revenue and cash inflow in its accounts.<\/p>\n<p>On the surface:<\/p>\n<p>There are sales;<\/p>\n<p>Payment has been made;<\/p>\n<p>Invoice available;<\/p>\n<p>There are even multiple companies.<\/p>\n<p>But what really needs to be judged is:<\/p>\n<p>Does each company have an independent transaction purpose?<\/p>\n<p>Did the goods actually move?<\/p>\n<p>Who bears the price risk?<\/p>\n<p>Who bears the credit risk?<\/p>\n<p>Where does the funding actually come from?<\/p>\n<p>Where do we eventually return to?<\/p>\n<p>therefore:<\/p>\n<p>&quot;The deal went in circles&quot;<\/p>\n<p>This is an important warning sign.<\/p>\n<p>However, further proof is still needed:<\/p>\n<p>Is this cycle designed to generate false revenue or other misleading financial results?<\/p>\n<h2>5. For cases involving circular transactions, two diagrams must be drawn: one for the &quot;flow of goods&quot; and one for the &quot;flow of funds&quot;.<\/h2>\n<p>Looking at bank accounts alone is not enough.<\/p>\n<p>Looking at the shipping information alone is not enough.<\/p>\n<p>It&#039;s best to split it into two images:<\/p>\n<h3>Commodity flow<\/h3>\n<p>A \u2192 B \u2192 C \u2192 Where do we end up?<\/p>\n<h3>cash flow<\/h3>\n<p>Who pays whom?<\/p>\n<p>Where did the payment funds originally come from?<\/p>\n<p>Was there any return flow afterwards?<\/p>\n<p>If the product flow shows:<\/p>\n<p>The goods did not actually leave the original company.<\/p>\n<p>However, the funds circulated among multiple companies.<\/p>\n<p>The investigators may have serious doubts about the authenticity of the transaction.<\/p>\n<p>in turn,<\/p>\n<p>If the goods are indeed ultimately sold to an independent third-party customer<\/p>\n<p>Every company has its own profits and risks.<\/p>\n<p>Therefore, it cannot be concluded that a transaction is fake simply because there are related companies involved.<\/p>\n<h2>6. What is &quot;inflated revenue&quot;?<\/h2>\n<p>Inflating revenue usually refers to a company using untrue, premature, improper, or other means to make the operating revenue on its financial statements higher than the amount that should actually be recognized.<\/p>\n<p>Possible scenarios include:<\/p>\n<p>Fictitious sales that do not exist;<\/p>\n<p>Pre-emptive recognition before the transaction is completed;<\/p>\n<p>Acceptance without prior inspection;<\/p>\n<p>Large quantities were shipped out at the end of the year, and then quickly returned.<\/p>\n<p>Revenue is generated through related-party transactions;<\/p>\n<p>Multiple transactions of the same product;<\/p>\n<p>The payment funds were actually provided by the company itself.<\/p>\n<p>Or other arrangements that lack economic substance.<\/p>\n<p>but:<\/p>\n<p><strong>Revenue recognition error<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>Criminally Intentionally Inflating Revenue<\/strong><\/p>\n<p>It&#039;s still not exactly the same thing.<\/p>\n<p>Criminal liability still requires proof that the relevant personnel knew the transaction or identified it as problematic, and that they had the subjective intent required by law.<\/p>\n<h2>7. Why are transactions at the end of the year particularly easy to be investigated?<\/h2>\n<p>Financial statement cases are often subject to special scrutiny:<\/p>\n<p>The fourth season;<\/p>\n<p>December;<\/p>\n<p>The last few days before the end of the year.<\/p>\n<p>The reason is simple:<\/p>\n<p>Annual revenue, profit, and financial metrics will be determined soon.<\/p>\n<p>If the company suddenly appears at the end of the year:<\/p>\n<p>Unusually large sales volume;<\/p>\n<p>New customers;<\/p>\n<p>Large quantities were shipped ahead of schedule;<\/p>\n<p>Unusually lenient payment terms;<\/p>\n<p>A large number of returns occurred at the beginning of the following year;<\/p>\n<p>Accounts receivable increased rapidly.<\/p>\n<p>This makes it easy to become a focus of investigation.<\/p>\n<p>but:<\/p>\n<p>Year-end transactions are not inherently criminal.<\/p>\n<p>Businesses may inherently possess:<\/p>\n<p>Year-end peak season;<\/p>\n<p>Customer budget;<\/p>\n<p>Project acceptance;<\/p>\n<p>Seasonal factors.<\/p>\n<p>What really needs to be compared is:<\/p>\n<p>Are these transactions consistent with the company&#039;s past normal operating model?<\/p>\n<h2>8. Is &quot;issuing an invoice first and then shipping the goods&quot; necessarily a fake transaction?<\/h2>\n<p>It cannot be generalized.<\/p>\n<p>To see:<\/p>\n<p>contract;<\/p>\n<p>Transaction terms;<\/p>\n<p>Industry practice;<\/p>\n<p>Has the product been completed?<\/p>\n<p>Whether ownership and risk are transferred;<\/p>\n<p>Has the customer committed to payment?<\/p>\n<p>Whether the contract was actually fulfilled subsequently remains to be seen.<\/p>\n<p>In some industries, there may be a difference between the invoice date and the actual delivery date.<\/p>\n<p>Criminal cases should not be viewed solely by:<\/p>\n<p>&quot;Invoice date is earlier than logistics date&quot;<\/p>\n<p>The crime determination can be completed directly.<\/p>\n<p>But if both of the following occur:<\/p>\n<p>The product does not exist at all;<\/p>\n<p>No further deliveries were made;<\/p>\n<p>The customer has no actual need;<\/p>\n<p>A large number of invoices will be issued at the end of the year;<\/p>\n<p>They rushed back the following year.<\/p>\n<p>The risks will certainly increase.<\/p>\n<h2>9. Why would the absence of actual inspection become crucial evidence of inflated revenue?<\/h2>\n<p>Especially in engineering, equipment, software, and project-based transactions.<\/p>\n<p>Whether or not the acceptance process is completed may directly affect:<\/p>\n<p>Has the transaction been completed?<\/p>\n<p>Has the consideration expired?<\/p>\n<p>Is the income suitable for recognition?<\/p>\n<p>Therefore, the investigation may focus on:<\/p>\n<p>Who will inspect it?<\/p>\n<p>Acceptance date?<\/p>\n<p>Has there been any testing?<\/p>\n<p>Has it been signed for?<\/p>\n<p>Has the customer system actually gone live?<\/p>\n<p>Was the equipment actually installed?<\/p>\n<p>Was the service actually provided?<\/p>\n<p>If a huge amount of revenue has already been recognized in the accounts,<\/p>\n<p>However, the client has absolutely no corresponding performance documentation.<\/p>\n<p>This can easily lead to major doubts.<\/p>\n<h2>10. Does a large amount of accounts receivable mean that the transactions are fake?<\/h2>\n<p>no.<\/p>\n<p>Real businesses may exist in the first place:<\/p>\n<p>Long payment terms;<\/p>\n<p>Customers are in arrears;<\/p>\n<p>bad debt;<\/p>\n<p>Funds for major projects.<\/p>\n<p>so:<\/p>\n<p>Increase in accounts receivable<\/p>\n<p>This alone cannot prove that the transaction was fake.<\/p>\n<p>However, if the following occurs:<\/p>\n<p>Revenue increased significantly;<\/p>\n<p>But no cash came in;<\/p>\n<p>Accounts receivable have been outstanding for a long time;<\/p>\n<p>The client&#039;s capital is very low;<\/p>\n<p>The client has a relationship with the company&#039;s management.<\/p>\n<p>The company almost never engages in debt collection;<\/p>\n<p>Years later, it was directly written off.<\/p>\n<p>The investigators may further suspect:<\/p>\n<p>Did a real transaction actually take place back then?<\/p>\n<h2>11. Payment records are one of the most important pieces of evidence, but it&#039;s also necessary to investigate &quot;where the money came from.&quot;<\/h2>\n<p>Let&#039;s assume the customer did indeed remit 50 million yuan to the company.<\/p>\n<p>On the surface:<\/p>\n<p>The payment has been received.<\/p>\n<p>However, if we trace further back, we find:<\/p>\n<p>The 50 million yuan was actually transferred to the client by a related party of the seller&#039;s company the day before.<\/p>\n<p>The customer then wired the same amount of money back to the seller.<\/p>\n<p>Therefore, the fact that &quot;there has been a payment&quot; cannot prove that the transaction was genuine.<\/p>\n<p>Therefore, the cash flow analysis in major fraudulent transaction cases cannot rely solely on:<\/p>\n<p>Receive payment.<\/p>\n<p>We still need to keep chasing:<\/p>\n<p><strong>Where does the payer&#039;s money come from?<\/strong><\/p>\n<h2>12. Does the repatriation of funds necessarily constitute a crime?<\/h2>\n<p>However, this cannot be generalized.<\/p>\n<p>Business transactions may include:<\/p>\n<p>Refund;<\/p>\n<p>loan;<\/p>\n<p>Funds lending;<\/p>\n<p>invest;<\/p>\n<p>return the goods;<\/p>\n<p>Discount;<\/p>\n<p>Substitute payment;<\/p>\n<p>Other legitimate financial transactions.<\/p>\n<p>Therefore, if the funds eventually return to the original system...<\/p>\n<p>Further analysis is still needed:<\/p>\n<p>Reasons for reflux;<\/p>\n<p>Legal relationship;<\/p>\n<p>contract;<\/p>\n<p>time;<\/p>\n<p>Amount;<\/p>\n<p>Is it reasonable?<\/p>\n<p>But if:<\/p>\n<p>After the customer makes payment,<\/p>\n<p>The same or similar amount of money was quickly returned to the customer or their controller through related companies.<\/p>\n<p>Furthermore, there is a lack of other reasonable explanations.<\/p>\n<p>This could become very damaging evidence.<\/p>\n<h2>13. Why are transactions involving related parties particularly easy to be identified as fake transactions?<\/h2>\n<p>Because it&#039;s easier between people with a relationship:<\/p>\n<p>Supporting documents;<\/p>\n<p>Payment coordination;<\/p>\n<p>Cooperate with shipment or acceptance.<\/p>\n<p>However, this does not mean that transactions involving related parties are inherently fraudulent.<\/p>\n<p>Group companies could legally cooperate with each other:<\/p>\n<p>Buying and selling;<\/p>\n<p>Provide services;<\/p>\n<p>Authorization;<\/p>\n<p>lease;<\/p>\n<p>Financing.<\/p>\n<p>Therefore, what really needs to be checked is:<\/p>\n<p>Is the price reasonable?<\/p>\n<p>Whether the contract has been actually fulfilled;<\/p>\n<p>Does the transaction have an independent business purpose?<\/p>\n<p>Did they take any risks?<\/p>\n<p>Whether it was disclosed in accordance with the law;<\/p>\n<p>Whether the funds have flowed back.<\/p>\n<p><strong>While identifying related persons increases the necessity of verification, it cannot replace the elements of a crime.<\/strong><\/p>\n<h2>14. Fake trades and unconventional trades are not the same thing.<\/h2>\n<p>The two can easily be confused.<\/p>\n<h3>fake transactions<\/h3>\n<p>The core issue might be:<\/p>\n<p>The transaction did not exist at all;<\/p>\n<p>The document does not reflect the economic reality.<\/p>\n<h3>Unconventional transactions<\/h3>\n<p>The transaction may actually exist.<\/p>\n<p>However, the terms of the transaction are clearly not in the company&#039;s best interest and do not conform to normal business practices.<\/p>\n<p>For example:<\/p>\n<p>The company really did buy a house.<\/p>\n<p>However, they purchased it from related parties at prices far exceeding market value.<\/p>\n<p>This doesn&#039;t necessarily mean it&#039;s a fake transaction.<\/p>\n<p>However, this could lead to unconventional transactions or exceptional breaches of trust.<\/p>\n<p>Therefore, it is necessary to distinguish them first:<\/p>\n<p><strong>Non-existent transactions<\/strong><\/p>\n<p>and:<\/p>\n<p><strong>Transactions that exist but are subject to abnormal conditions.<\/strong><\/p>\n<h2>15. What issues of commercial accounting law might be involved in cases of fraudulent transactions?<\/h2>\n<p>If the original transaction does not exist<\/p>\n<p>But the company still produces:<\/p>\n<p>bill;<\/p>\n<p>Accounting vouchers;<\/p>\n<p>summons;<\/p>\n<p>Account books;<\/p>\n<p>Financial statements<\/p>\n<p>This could potentially involve further...<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=J0080001\" target=\"_blank\" rel=\"noopener\">Article 71 of the Commercial Accounting Act<\/a>.<\/p>\n<p>In particular, it is necessary to confirm:<\/p>\n<p>Who prepared the voucher;<\/p>\n<p>Who enters the tent;<\/p>\n<p>Who provided the transaction information?<\/p>\n<p>Who knew the transaction was fraudulent?<\/p>\n<p>Who was simply following the normal procedures?<\/p>\n<p>If false information is intentionally entered through electronic ERP or accounting systems<\/p>\n<p>It 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>.<\/p>\n<p>so:<\/p>\n<p>Fake transactions are a problem with the front-end transaction process;<\/p>\n<p>Business accounting rules may apply to back-end accounting data processing.<\/p>\n<p>The two should be considered together, but not confused into the same action. See related articles for further discussion.<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<h2>16. Do accountants necessarily know that the front-end transactions are fake?<\/h2>\n<p>uncertain.<\/p>\n<p>For example, the business department assigns it to the accountant:<\/p>\n<p>contract;<\/p>\n<p>Delivery order;<\/p>\n<p>Acceptance form;<\/p>\n<p>bill;<\/p>\n<p>Supervisor&#039;s approval.<\/p>\n<p>Accountants may only record transactions based on superficially complete information. Further details regarding the degree of individual involvement can be found in the documentation.<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/cfo-accounting-officer-financial-statement-criminal-liability\/\">Supervisor&#039;s instructions on bookkeeping and criminal liability of accounting personnel<\/a>.<\/p>\n<p>If in reality:<\/p>\n<p>The customer is fake;<\/p>\n<p>The goods have not been shipped;<\/p>\n<p>Funds were provided by related parties.<\/p>\n<p>But this kind of information is completely outside the scope of an accountant&#039;s job.<\/p>\n<p>It cannot be just because:<\/p>\n<p>&quot;He typed in the summons.&quot;<\/p>\n<p>It can be directly inferred that the transaction was fake.<\/p>\n<p>Of course, if there is evidence in the file showing that the accountant already knew:<\/p>\n<p>No shipments were made;<\/p>\n<p>The document was remade;<\/p>\n<p>The customer is unable to pay;<\/p>\n<p>They still deliberately cooperated in entering the account.<\/p>\n<p>Criminal evaluations differ. See relevant articles for further discussion.<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>17. Why is it so important that accountants once opposed recording entries in the books?<\/h2>\n<p><a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=J0080001\" target=\"_blank\" rel=\"noopener\">Article 73 of the Commercial Accounting Act<\/a>Special provisions:<\/p>\n<p>The organizing or handling accountant or personnel related to electronic accounting data,<\/p>\n<p>If one commits a crime related to Article 71 or 72,<\/p>\n<p>However, they had previously expressed their refusal or offered corrections.<\/p>\n<p>And there is solid evidence.<\/p>\n<p>His sentence may be reduced or waived in accordance with the law.<\/p>\n<p>therefore:<\/p>\n<p>Email;<\/p>\n<p>Approval comments;<\/p>\n<p>Company news;<\/p>\n<p>Meeting minutes<\/p>\n<p>If it can be proven that the accountant said:<\/p>\n<p>&quot;This transaction cannot be recorded without prior acceptance.&quot;<\/p>\n<p>Please provide the shipping information.<\/p>\n<p>&quot;There&#039;s a problem with this customer.&quot;<\/p>\n<p>It may have direct legal value.<\/p>\n<p>Do not do it afterwards.<\/p>\n<p>What is truly valuable is:<\/p>\n<p><strong>The original records that existed at that time.<\/strong><\/p>\n<h2>18. Why do fake transaction cases often involve searching for business, finance, accounting, and responsible persons simultaneously?<\/h2>\n<p>Because transactions go through different departments from the front end to the financial statements.<\/p>\n<p>The prosecutors may want to know:<\/p>\n<p>business:<br>Is the transaction real?<\/p>\n<p>finance:<br>Where does the money come from?<\/p>\n<p>Accounting:<br>Why record it this way?<\/p>\n<p>manager:<br>Who approved it?<\/p>\n<p>Person in charge:<br>Why should the company do this?<\/p>\n<p>Therefore, many people from the same company may be searched and interviewed. See related articles for further information.<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<p>But this does not mean that everyone is a co-perpetrator.<\/p>\n<p>Criminal liability must still be maintained:<\/p>\n<p><strong>Individualization.<\/strong><\/p>\n<h2>19. Conflicting accounts from multiple individuals do not immediately lead to the conclusion that someone is colluding or lying.<\/h2>\n<p>The fake transaction may have occurred several years ago.<\/p>\n<p>Different departments naturally have different knowledge.<\/p>\n<p>The business may know:<\/p>\n<p>client.<\/p>\n<p>The warehouse knows:<\/p>\n<p>Has the goods been shipped?<\/p>\n<p>Financial Knowledge:<\/p>\n<p>Payment.<\/p>\n<p>Accountants know:<\/p>\n<p>How to keep accounts.<\/p>\n<p>The chairman only knows:<\/p>\n<p>Significant transactions and financial results.<\/p>\n<p>Therefore, differing testimonies do not necessarily mean that someone is lying.<\/p>\n<p>What we should really hear is everyone&#039;s opinion and:<\/p>\n<p>Position;<\/p>\n<p>document;<\/p>\n<p>time;<\/p>\n<p>Actual behavior<\/p>\n<p>Compare them with each other.<\/p>\n<h2>20. One of the biggest mistakes after searching is rushing to &quot;complete the transaction documents&quot;.<\/h2>\n<p>If the company suddenly discovers:<\/p>\n<p>Some contracts were not signed;<\/p>\n<p>The acceptance form is incomplete;<\/p>\n<p>The consultant&#039;s report does not exist.<\/p>\n<p>After searching, don&#039;t try to make the transaction appear complete by:<\/p>\n<p>Backfill the date;<\/p>\n<p>Supplementary signature;<\/p>\n<p>Recreate the old file;<\/p>\n<p>Edit the date in the electronic file.<\/p>\n<p>This could potentially escalate existing financial statements or transaction disputes.<\/p>\n<p>Further transforming into the new:<\/p>\n<p>Forgery;<\/p>\n<p>Destroy evidence;<\/p>\n<p>Serial certificates<\/p>\n<p>question.<\/p>\n<p>If it is necessary to organize the case,<\/p>\n<p>It can be made into:<\/p>\n<p>&quot;Post-event explanation document&quot;<\/p>\n<p>But it must be clearly indicated:<\/p>\n<p>When was it compiled, and what original data was it based on?<\/p>\n<p>It cannot be disguised as a document from the time of the transaction.<\/p>\n<h2>21. The most important thing to establish in a fake transaction case is &quot;one form per transaction&quot;.<\/h2>\n<p>Each transaction questioned by the prosecution can be compiled as follows:<\/p>\n<p>Transaction date;<\/p>\n<p>client;<\/p>\n<p>Amount;<\/p>\n<p>Goods or services;<\/p>\n<p>contract;<\/p>\n<p>Order;<\/p>\n<p>Shipment;<\/p>\n<p>acceptance;<\/p>\n<p>bill;<\/p>\n<p>Accounting recognition date;<\/p>\n<p>Payment terms;<\/p>\n<p>Actual payment;<\/p>\n<p>Source of payment funds;<\/p>\n<p>Returns or discounts;<\/p>\n<p>Relationships between related parties;<\/p>\n<p>Relevant personnel;<\/p>\n<p>Impact on final financial statements.<\/p>\n<p>This makes it very easy to see:<\/p>\n<p>Which one is truly problematic?<\/p>\n<p>Which one is simply due to incomplete documentation?<\/p>\n<p>Which one was actually fully fulfilled?<\/p>\n<p>Which transaction was abnormal?<\/p>\n<p>Major financial reporting cases cannot involve mixing dozens of transactions together.<\/p>\n<section class=\"fd-chain\"><h2>Transaction authenticity check<\/h2><div class=\"fd-chain-grid\"><div class=\"fd-chain-step\"><strong>Commodity flow<\/strong><\/div><div class=\"fd-chain-step\"><strong>cash flow<\/strong><\/div><div class=\"fd-chain-step\"><strong>File Stream<\/strong><\/div><div class=\"fd-chain-step\"><strong>Accounting Flow<\/strong><\/div><div class=\"fd-chain-step\"><strong>Personnel Roles<\/strong><\/div><\/div><\/section><h2>22. Within the same company, different &quot;fake transactions&quot; may actually be completely different types of cases.<\/h2>\n<p>For example, the prosecution listed ten transactions at the same time.<\/p>\n<p>in:<\/p>\n<p>Three orders may not have been fulfilled;<\/p>\n<p>The two entries may simply be pre-approved;<\/p>\n<p>Both transactions were between related parties;<\/p>\n<p>There is a cash repatriation transaction;<\/p>\n<p>Two strokes are actually normal.<\/p>\n<p>Therefore, we cannot assume that just because one transaction is truly unusual...<\/p>\n<p>Therefore, it can be inferred that all of them were fake transactions.<\/p>\n<p>Each transaction still needs to be analyzed individually.<\/p>\n<p>This also highlights the importance of evidence-based defense.<\/p>\n<h2>23. Does inflating revenue affect stock price necessarily constitute a crime under the Securities Exchange Law?<\/h2>\n<p>We cannot judge solely by the result.<\/p>\n<p>Financial statements that are found to be inaccurate under the Securities Exchange Act still require proof.<\/p>\n<p>The financial reports that are declared or published in accordance with the law are false or concealed;<\/p>\n<p>And the relevant defendants meet the requirements for criminal liability.<\/p>\n<p>Even if the market may be affected by earnings reports<\/p>\n<p>Individual criminal responsibility still needs to be addressed by:<\/p>\n<p>Behavior;<\/p>\n<p>Role;<\/p>\n<p>Subjective knowledge;<\/p>\n<p>Criminal links.<\/p>\n<p>The relevant regulations concerning false or concealed financial reports should be followed.<a href=\"https:\/\/law.moj.gov.tw\/LawClass\/LawAll.aspx?pcode=G0400001\" target=\"_blank\" rel=\"noopener\">Articles 20 and 171 of the Securities Exchange Act<\/a>Judge each item individually.<\/p><p>Just because a company&#039;s financial statements show large numbers doesn&#039;t mean it should.<\/p>\n<p>This automatically includes every director or employee in the criminal list.<\/p>\n<h2>24. If the company later reverses the revenue, does that mean it admits that it was a fake transaction?<\/h2>\n<p>uncertain.<\/p>\n<p>Subsequent write-offs may come from:<\/p>\n<p>return the goods;<\/p>\n<p>Transaction cancelled;<\/p>\n<p>Accounting adjustments;<\/p>\n<p>Bug fixes;<\/p>\n<p>Customer dispute.<\/p>\n<p>Therefore, we cannot only see:<\/p>\n<p>&quot;It surged back the following year.&quot;<\/p>\n<p>The criminal determination can be completed directly.<\/p>\n<p>However, if a large number of transactions are suddenly recognized just before the end of the year...<\/p>\n<p>The entire amount was quickly written off the following year.<\/p>\n<p>Furthermore, there is a lack of actual shipments and payments.<\/p>\n<p>Of course, this could form a very unfavorable combination of evidence.<\/p>\n<h2>25. What is the significance of external accountant audits in cases of fraudulent transactions?<\/h2>\n<p>The information audited by the accountant may include:<\/p>\n<p>Accounts receivable confirmation;<\/p>\n<p>stock;<\/p>\n<p>Major transactions are subject to random inspection;<\/p>\n<p>Customer reply;<\/p>\n<p>Verification and adjustment;<\/p>\n<p>Significant accounting judgments;<\/p>\n<p>Management Representation;<\/p>\n<p>Email.<\/p>\n<p>If the external accountant has:<\/p>\n<p>Questioning the transaction;<\/p>\n<p>Request for additional information;<\/p>\n<p>Adjustments are required;<\/p>\n<p>Or conversely, if the processing is deemed acceptable after fully understanding the information.<\/p>\n<p>These could all be important background factors.<\/p>\n<p>but:<\/p>\n<p>Accountant visa<\/p>\n<p>This does not mean that anyone within the company is necessarily innocent;<\/p>\n<p>This also does not mean that the accountant will be held criminally liable.<\/p>\n<p>Each person&#039;s responsibility still needs to be judged individually.<\/p>\n<h2>26. If a fraudulent transaction case has already entered the detention process, one should not only focus on proving that goods were shipped.<\/h2>\n<p>Following searches of multiple individuals involved in major financial cases<\/p>\n<p>The prosecution may also argue that:<\/p>\n<p>Serial certificates;<\/p>\n<p>Destroy evidence;<\/p>\n<p>escape.<\/p>\n<p>Therefore, even if the company has found:<\/p>\n<p>Shipment;<\/p>\n<p>acceptance;<\/p>\n<p>Payment<\/p>\n<p>This can prove the authenticity of the transaction.<\/p>\n<p>The detention court will handle the matter separately.<\/p>\n<p>Did the defendant come into contact with other employees?<\/p>\n<p>Which documents have been seized?<\/p>\n<p>Is it still possible to modify the ERP system?<\/p>\n<p>Have key witnesses been questioned?<\/p>\n<p>Can restrictions on contact, bail, residence, or exit be used as alternatives to detention?<\/p>\n<p>Substantive and procedural defenses must be conducted concurrently. For related topics, please refer to [link\/reference needed].<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/securities-law-detention-hearing\/\">Detention Courtroom Battles in Securities Trading Law Cases<\/a>.<\/p>\n<h2>27. What&#039;s truly needed in major fraudulent transaction cases isn&#039;t simply the statement &quot;all goods were shipped out.&quot;<\/h2>\n<p>If the prosecution already has:<\/p>\n<p>Capital repatriation;<\/p>\n<p>Related persons;<\/p>\n<p>Year-end concentrated trading;<\/p>\n<p>Accounts receivable;<\/p>\n<p>return the goods;<\/p>\n<p>Accounting irregularities<\/p>\n<p>Providing only one shipping order is usually not enough.<\/p>\n<p>What is truly needed is a complete restoration:<\/p>\n<p>Who needs this shipment?<\/p>\n<p>Why buy it?<\/p>\n<p>Where did the goods go?<\/p>\n<p>Who uses it?<\/p>\n<p>Why pay in this way?<\/p>\n<p>Does the counterparty in the transaction have an independent interest?<\/p>\n<p>Who ultimately bears the risk?<\/p>\n<p>This is what it means:<\/p>\n<p><strong>Economic substance.<\/strong><\/p>\n<h2>28. Even if some transactions are indeed problematic, this should not be used to disregard the defense of other legitimate transactions.<\/h2>\n<p>Common types of major financial criminal cases:<\/p>\n<p>Prosecutors charged dozens of transactions at once.<\/p>\n<p>If some of the strokes do indeed have obvious flaws<\/p>\n<p>The defense should not simply admit to all the transactions in one package.<\/p>\n<p>It should be distinguished that:<\/p>\n<p>Disputed transactions;<\/p>\n<p>A transaction without disputes;<\/p>\n<p>Transactions with clearly insufficient evidence;<\/p>\n<p>Transactions requiring legal evaluation;<\/p>\n<p>And the part that may consider other defense strategies.<\/p>\n<p>The bigger the case,<\/p>\n<p>The more needed:<\/p>\n<p><strong>Stroke segmentation.<\/strong><\/p>\n<h2>29. When handling these types of cases, Fidelity Law Firm will start by examining the transaction itself.<\/h2>\n<p>The most common problem in cases involving major financial statements and fraudulent transactions is that the case files have already arranged all the information according to the prosecution&#039;s criminal story.<\/p>\n<p>However, criminal defense should still return to:<\/p>\n<p>Original transaction.<\/p>\n<p>When handling corporate criminal and major financial criminal cases, Fidelity Law Firm will reorganize the case accordingly:<\/p>\n<p>trade;<\/p>\n<p>commodity;<\/p>\n<p>contract;<\/p>\n<p>Shipment;<\/p>\n<p>acceptance;<\/p>\n<p>Accounting;<\/p>\n<p>Cash flow;<\/p>\n<p>Company role;<\/p>\n<p>With criminal evidence.<\/p>\n<p>Attorney Li Yusheng previously served as the legal head of a large accounting firm and has publicly addressed legal issues related to listed companies&#039; fraudulent transactions, inflated revenue, and inaccurate financial statements. For related topics, please refer to [link\/reference].<a href=\"https:\/\/fdlaw.com.tw\/en\/blog\/financial-statement-fraud\/\">Lawyer Li Yusheng&#039;s Legal Explanation of Inaccurate Financial Reports in the Media<\/a>.<\/p>\n<p>Recently, our firm has once again been assigned to handle a major criminal case under the Securities and Exchange Act, involving multiple defendants, investigation and detention, and a large amount of corporate financial, transaction and criminal evidence.<\/p>\n<p>Due to the principle of non-disclosure of investigations and the interests of the appointing party, this firm will not disclose recent case numbers, names of parties involved, or undisclosed investigation content, nor does it imply that the case has been determined to involve fraudulent transactions or false financial statements.<\/p>\n<h2>FAQ on Fake Transactions, Circular Transactions, and Inflated Revenue<\/h2>\n<details><summary>Does having an invoice and a remittance guarantee that the transaction is genuine?<\/summary><p>Not necessarily. It&#039;s still necessary to verify whether there are genuine goods or services, actual performance of the contract, the source of payment funds, transaction risks, and economic substance. Formal invoices and remittances are only part of the evidence.<\/p><\/details>\n<details><summary>Does the absence of a formal contract necessarily mean it&#039;s a fake transaction?<\/summary><p>Not necessarily. Some business transactions may be conducted through orders, emails, or long-term partnerships. A comprehensive assessment based on shipment, acceptance, payment, communication, and other objective data is still necessary.<\/p><\/details>\n<details><summary>Does buying and selling between related parties necessarily constitute a cyclical transaction?<\/summary><p>Not necessarily. Related parties can engage in legitimate and genuine transactions. The key factors are whether the transaction has an independent business purpose, actual performance, reasonable pricing and risk-sharing, and whether there is any abnormal return of funds.<\/p><\/details>\n<details><summary>Does the fact that accounts receivable are not being collected mean that the revenue is fake?<\/summary><p>Not necessarily. Genuine transactions can also result in overdue or bad debts. However, if factors such as no shipments, insufficient customer funds, lack of proper collection efforts, and related parties are present simultaneously, it may increase the suspicion of prosecutors and investigators.<\/p><\/details>\n<details><summary>If the customer actually makes the payment, will it still be considered a fake transaction?<\/summary><p>Possibly. If the payment was actually provided in advance by the seller, related parties, or other sources under common control, it may still be subject to scrutiny to determine whether it was merely a formality.<\/p><\/details>\n<details><summary>If an accountant simply enters a document into the books after seeing it, will they face criminal charges?<\/summary><p>It depends on whether the information was knowingly falsified. If it was simply processed according to normal company procedures and seemingly complete documentation, without evidence proving that the person knew the front-end transactions were fraudulent, one cannot infer criminal intent simply because they were the one who actually entered the accounting data.<\/p><\/details>\n<details><summary>Does a company&#039;s practice of shipping large quantities of goods at the end of the year and returning them the following year necessarily mean that it is artificially inflating its revenue?<\/summary><p>Not necessarily, but such timing and transaction patterns are usually carefully verified. It is still necessary to confirm the actual customer demand, the reasons for shipment, acceptance, returns, and the basis for revenue recognition.<\/p><\/details>\n<details><summary>After searching, I found that the file is indeed missing. Can it be remade?<\/summary><p>It is permissible to create a post-transactional summary or explanation with clearly marked dates based on the original data, but dates should not be backdated or documents should not be added to appear to have existed at the time of the transaction, otherwise new criminal and evidentiary risks may arise.<\/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\/listed-company-financial-statement-fraud-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_frpeo2frpeo2frpe-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_frpeo2frpeo2frpe-768x429.jpeg 768w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-300x167.jpeg 300w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1024x572.jpeg 1024w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-1536x857.jpeg 1536w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-2048x1143.jpeg 2048w, https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_frpeo2frpeo2frpe-18x10.jpeg 18w\" title=\"\"><\/div><div class=\"fdlaw-related-card__body\"><h3 class=\"fdlaw-related-card__title\">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.<\/h3><p class=\"fdlaw-related-card__excerpt\">In cases of significant financial statement misrepresentation, first dismantle six layers: 1. Whether the original transactions were genuine; 2. Whether invoices, orders, shipments, and acceptances match; 3. How were accounting vouchers and ledgers recorded; 4. Who decided on the accounting treatment and revenue recognition; 5. Which information ultimately appears in the legally required financial reports; 6. Each director, financial officer\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\/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><\/div><\/section>\n\n\n<div class=\"fd-circular-transactions\"><h2>The real issue in cases of sham transactions is not whether the documents look like a transaction, but whether the transaction actually has any economic substance.<\/h2>\n<p>The real question that needs to be answered in major financial statement criminal cases is:<\/p>\n<p>Who needs this product or service?<\/p>\n<p>Why trade?<\/p>\n<p>Has the contract been fulfilled?<\/p>\n<p>Where does the money come from?<\/p>\n<p>Who bears the risk?<\/p>\n<p>Where do the goods and funds ultimately go?<\/p>\n<p>Why do accountants make this kind of recognition?<\/p>\n<p>Finally, how is it included in the financial reports?<\/p>\n<p>when:<\/p>\n<p>Goods flow;<\/p>\n<p>Cash flow;<\/p>\n<p>File stream;<\/p>\n<p>Accounting flow;<\/p>\n<p>Personnel Roles<\/p>\n<p>All stacked together,<\/p>\n<p>Only then can we truly make a judgment:<\/p>\n<p>This was a genuine but flawed business transaction.<\/p>\n<p>It is an accounting recognition dispute.<\/p>\n<p>It was a fake transaction designed to inflate revenue or embellish financial statements.<\/p>\n<p>If the company has been searched, or the person in charge, CFO, business manager, or accountant has been interviewed by the investigation bureau or district prosecutor&#039;s office, the transactions questioned by the prosecutor should be broken down one by one before deciding on the criminal questions that truly need to be answered for each transaction.<\/p><div class=\"fd-cta\"><h2>In cases of fraudulent transactions, the real issue is to reconstruct the transactions themselves, not just to interpret financial statements.<\/h2><p>Orders, shipments, receipts, invoices, accounting entries, accounts receivable, and payments must all be recorded on the same timeline. If a search, interrogation, detention, or prosecution has been initiated, the questioned transactions should be meticulously documented before determining liability under securities laws, business accounting laws, and individual criminal charges.<\/p><div class=\"fd-actions\"><a class=\"fd-button\" href=\"https:\/\/line.me\/ti\/p\/@723pifhz\" target=\"_blank\" rel=\"noopener\">LINE Inquiries about Major Financial Criminal Cases<\/a><a class=\"fd-button secondary\" href=\"https:\/\/fdlaw.com.tw\/en\/blog\/listed-company-financial-statement-fraud-defense\/\">Defense in a major criminal case involving misrepresentation of financial statements<\/a><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"<p>If accused of fraudulent transactions or inflated revenue, first investigate five lines of evidence: 1. Whether the goods or services were actually fulfilled; 2. Whether the orders, shipments, receipts, and invoices are consistent; [...]<\/p>","protected":false},"author":4,"featured_media":12588,"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-12579","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_hwca0qhwca0qhwca-scaled.jpeg",2560,1429,false],"landscape":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-1200x750.jpeg",1200,750,true],"portraits":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-540x320.jpeg",540,320,true],"thumbnail":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-150x150.jpeg",150,150,true],"medium":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-300x167.jpeg",300,167,true],"medium_large":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-768x429.jpeg",768,429,true],"large":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-1024x572.jpeg",1024,572,true],"1536x1536":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-1536x857.jpeg",1536,857,true],"2048x2048":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-2048x1143.jpeg",2048,1143,true],"trp-custom-language-flag":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-18x10.jpeg",18,10,true],"qubely_landscape":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-1200x750.jpeg",1200,750,true],"qubely_portrait":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-540x320.jpeg",540,320,true],"qubely_thumbnail":["https:\/\/fdlaw.com.tw\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_hwca0qhwca0qhwca-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":"\u88ab\u63a7\u5047\u4ea4\u6613\u6216\u865b\u589e\u71df\u6536\uff0c\u5148\u67e5\u4e94\u689d\u7dda\uff1a 1. \u5546\u54c1\u6216\u670d\u52d9\u6709\u6c92\u6709\u771f\u6b63\u5c65\u884c\uff1b2. \u8a02\u55ae\u3001\u51fa\u8ca8\u3001\u9a57\u6536\u8207\u767c\u7968\u662f\u5426\u4e92\u76f8\u4e00\u81f4\uff1b&hellip;","_links":{"self":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12579","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=12579"}],"version-history":[{"count":3,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12579\/revisions"}],"predecessor-version":[{"id":12607,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/posts\/12579\/revisions\/12607"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/media\/12588"}],"wp:attachment":[{"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/media?parent=12579"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/categories?post=12579"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fdlaw.com.tw\/en\/wp-json\/wp\/v2\/tags?post=12579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}