Case Study On Audit Failure Of Ruihua Certified Public Accountants To KangDeXin Composite Material Group

During the 40 years of reform and opening up,my country’s certified public accountant industry has experienced a spurt of development,achieving rapid growth in scale and business.In recent years,a series of audit failure cases that shocked the market have occurred in my country.For example,the well-known listed companies such as Furen Pharmaceutical and Kangmei have serious financial fraud problems.Accountants who provide audit services for these listed companies with financial frauds The firm did not find any signs of fraud before the incident,which caused serious doubts about the audit quality of certified public accountants,and the certified public accountant industry frequently fell into a credibility crisis.Among the many failed audit cases,this paper chooses Ruihua to study the failed audit cases of Kangdexin for the following reasons: First,The financial fraud of Kangdexin is the largest amount of fraud since the establishment of China’s securities market,and it has been involved for as long as 4 years,which is very serious in nature.Second,Ruihua used to be the largest domestic accounting firm in China.However,in recent years,ruihua was repeatedly punished by the CSRC.After being investigated again by the CSRC in July 2019,news of its dissolution was frequently spread.In this article,therefore,summarizing domestic and foreign scholar’s contribution in terms of audit failure,on the basis of combining ruihua to Kant’s new audit failure cases,using the principal-agent theory,asymmetric information theory,conflict theory of audit from auditors ruihua,such as kang new auditees and external supervision of the three Angle to analyze the reason of audit failure,and corresponding preventive measures are put forward.This article is divided into six chapters.In addition to the introduction,Chapter 2and Chapter 6 are the main contents of this article.The second chapter expounds the concept,characteristics,performance,motivation and theoretical basis of audit failure.The characteristics of audit failure include: relatively common in continuous audit;usually involving financial fraud of the audited unit;related to improper implementation of audit procedures;the size of the firm is directly proportional to the degree of audit failure.The third chapter introduces the basic situation of Ruihua and Kangdexin,reviews the case of Kangdexin’s financial fraud in more detail,and analyzes the performance of Kangdexin’s audit failure based on the theory of audit failure.Chapter 4specifically analyzes the reasons for Kangdexin’s audit failure from three dimensions.Specifically,at the level of accounting firms and certified public accountants,the audit quality control mechanism of the firm is not sound,the continuous audit of the audit team leads to a lack of independence,the letter of evidence procedure is just a formality,and the auditor does not maintain a professional "double high of deposit and loan" Suspicion and other reasons;at the level of the audited entity,Kangdexin’s fund management and control are flawed,the governance mechanism is seriously ineffective,major shareholders illegally occupy funds and the management deliberately cheat;in the external environment,fierce competition in the audit market leads to low prices,Insufficient supervision and punishment have resulted in lower costs of violations and weakened audit legal responsibilities.The fifth chapter proposes targeted preventive measures based on the previous analysis.First of all,from the perspective of accounting firms and certified public accountants,we should improve the audit quality control mechanism,improve the auditor rotation mechanism,pay attention to abnormal audit evidence and strengthen the control of the letter of evidence.Secondly,from the perspective of the audited entity,it is necessary to standardize the capital management and control mechanism,establish a mechanism for equity checks and balances,improve the information disclosure mechanism and improve the management performance evaluation system.Finally,from the perspective of external supervision,the audit market should be standardized,and industry administrative supervision and investor protection mechanisms should be strengthened.