Author(s)

Mili Xie ¹

Affiliation(s)

¹ Business School, University of Shanghai for Science and Technology, Shanghai, China

Corresponding Author

Mili Xie

ABSTRACT

The global semiconductor industry faces unprecedented challenges from technological competition and geopolitical tensions, placing Chinese semiconductor companies under triple pressures of high R&D investment, lengthy capacity ramp-up cycles, and heavy capital expenditure burdens. These pressures create incentives for firms to manipulate revenue recognition, yet existing detection methods remain fragmented. This study addresses the gap by investigating revenue recognition manipulation in Chinese semiconductor listed companies through a dual-method approach combining case study and horizontal comparative analysis. Taking SMIC as a typical case, we analyze its revenue recognition patterns and capital expenditure dynamics from 2020 to 2024, revealing significant anomalies including revenue-cash flow deviations and abnormal accounts receivable growth. Key findings indicate that when the accounts receivable growth rate exceeds revenue growth by 15 percentage points, the probability of financial irregularities significantly increases. Furthermore, fourth-quarter revenue accounts for 38.7% of total annual revenue—substantially higher than the 26.4% average in other quarters—revealing distinct seasonal manipulation patterns. The study identifies dual driving forces behind manipulation: performance-based agreements requiring annual revenue growth above 30% and management stock incentives with revenue growth thresholds of ≥25%. Based on these findings, We found that the combined effect of performance agreements and incentive mechanisms significantly increases the risk of financial misstatements. This research contributes to fraud detection literature by providing industry-specific analytical frameworks for capital-intensive sectors and offers practical implications for auditors, regulators, and investors in identifying revenue recognition manipulation in high-tech industries.

KEYWORDS

Revenue Recognition Manipulation; Semiconductor Industry; Financial Fraud; Case Study; SMIC; Accounts Receivable Anomaly

CITE THIS PAPER

Mili Xie. Identification and Prevention of Income Recognition Flushing: A Case Study of Chinese Semiconductor Listed Companies. Accounting and Corporate Management (2026). Vol. 8, No. 1, 26-33. DOI: http://dx.doi.org/10.23977/acccm.2026.080104.

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