Case Study Of Audit Failure Of Eastern Gold Jade Co.,Ltd.from The Perspective Of CPA Diligence

With the continued development of the socialist market economy and the development of China’s capital market,more and more investors have started to invest in the capital market and the financial statements of listed companies are seen as a reliable tool to understand the operating conditions of companies.Due to the asymmetry of information,the role of independent third-party auditing has become increasingly prominent.Auditing can provide accounting information,contribute to optimal resource allocation and continuously improve the effectiveness of the contract.However,in recent years,the audit business has been thunderstormed,and many certified public accountants have failed to identify false information in the financial statements when auditing the annual reports of listed companies,and issued inappropriate audit opinions,and have been punished by the China Securities Regulatory Commission.A reading of the CSRC’s administrative penalty announcement on the failure of an accounting firm’s audit reveals that it mentions the problem of insufficient diligence and due diligence of certified public accountants on many occasions.As due diligence is the most important requirement for auditors to perform an audit,due diligence is linked to audit success or failure,and the lower the level of due diligence,the greater the likelihood of audit failure.Many audit failures not only damage investors’ interests,cause auditors to lose social credibility,but also seriously affect the normal economic order of China’s securities market.With the issuance of the State Administrative Document No.30 dated 30 July 2021,the State has paid more and more attention to the supervision of the auditing profession,and the supervision has been continuously improved.Certified public accountants should provide audit services with diligence and diligence,improve audit quality,and avoid audit failures.Based on the theories of information asymmetry theory,principal-agent theory,audit conflict theory,rational economic man theory and fraud triangle theory,this thesis adopts the literature research method and case analysis method,and studies audit failure from the perspective of CPA diligence.On the basis of the literature review,the concepts of audit failure and CPAs’ diligence are defined,and combined with the CSRC’s penalty announcement,it is clarified that CPAs’ failure to exercise due diligence is an important factor triggering audit failure.In this thesis,we selected the case of audit failure of Dahua Accounting Firm in 2017 on Eastern Gold Jade Co.,Ltd.,the latest penalty in 2022,for study.Combined with the CSRC’s penalty announcement,this thesis analyzes the various manifestations of Eastern Gold Jade Co.,Ltd.’s financial fraud methods and the failure of certified public accountants to exercise due diligence,and explains the punishment consequences of audit failure.Since then,in-depth studies have been carried out at the level of supervisory authorities,accounting firms and statutory auditors,and it is believed that the main reasons for the lack of due diligence in the audit work of certified public accountants are insufficient regulatory penalties,ambiguity and relative lag in auditing standards,insufficient internal quality control of accounting firms,increased pressure on certified public accountants due to business expansion,fierce competition and chaotic competition order in the accounting firm industry,lack of professional attention and suspicion of individual certified public accountants,and insufficient due diligence in audit procedures.Based on the cause analysis,targeted countermeasures are given to prevent the CPA from failing to exercise due diligence,in order to reduce the probability of audit failure.This article argues that the regulatory level should strengthen regulatory penalties and improve auditing standards;Accounting firms need to improve their internal quality control systems,regularly evaluate the business undertaking and maintenance,and the Institute of Certified Public Accountants should also strengthen industry supervision and maintain a good competition order;At the individual level,certified public accountants should maintain due professional attention and suspicion,continuously improve their professional competence,and maintain diligent and conscientious audits.