Study On The Audit Risk Of CPAs And The Current Situation

With the development of economy, the field of CPAs' audit has been faced with the other economic fields: with the intensification of competition in market, the incomes of accounting firms are falling. For sharing with audit market, the accounting firms either improve the audit efficiency to cut down the audit cost, or maintain "unusual relations" with clients. For the audit incomes are difficult to increase under the condition of orderly economy. If the accounting firms want to survive and develop, the auditors have to turn to the former. And it leads to great audit risk the auditors faced. This paper consists of five parts. The first part mainly explains some concepts of audit risk. And the second part introduces the audit risk model and the perfection of the audit risk model, and reforming the audit risk model under the current situation. The following part introduces the estimation of the audit risk and the elements of the audit risk. And the forth part uses game theory to explain the correlations between CPAs and management and supervision agencies. The last part of this paper empirically analyses audit risk based on the audit opinions. This paper begins with the research of audit theory, then analyses the three elements of the audit risk and the relations between them. And it makes us known of the importance of estimation of the elements of the audit risk, for these elements directly affect the numerical value of the audit risk that the auditors set up. So the estimation of these risks gets more important. Putting the audit risk model, which has been perfected and approved, into the estimation of these elements of the audit risk can offer the CPAs a better reliable method to lower the audit risk. Game theory mainly researches into the strategic decision when the behaviors of the subjects correlate and the equilibrium of them. That is to say, it researches into the influence of another subject to the choice of the subject, and then to affect the strategic decision and equilibrium of the choice of others. Audit risk is the outcomes of games between the CPAs, management and shareholders. We analyze correlations of the games between the CPAs, management and supervision agencies, especially the factors that affected the outcomes. The results indicate that the deeply social problems have affected the audit opinions the auditors present, such as the drawbacks of corporate governance, insufficient punishment of supervision agencies. The best methods need to start with these problems. If they have been solved, the CPAs will rationally present the audit opinions and try to lower audit risk.The following of this paper empirically analyses the CPAs' audit risk based on audit opinions. The modified opinions the CPAs presented have reflected whether the CPAs emphasize the audit risk. So the modified opinions can substitute for the audit risk. The results of the research of audit opinions from 1997 to 2000 show that the consciousness of audit risk of the accounting firms in China is improving step by step, and the consciousness of audit risk of the "top tens" is stronger than the "non-top tens". The share of the audit market of the "top tens" is contracting. The clients of "top tens" especially who have received the modified opinions fire the "top tens" and then turn to hire the "non-top tens". The final results are that the big accounting firms won't appear and it won't emerge scale economy of accounting firms. The last of the paper presents some measures to better lowering the audit risk based on the results that the former presented. If the accounting firms can really do following the measures, it will help the CPAs lower the audit risk.