Government Audit Risks-Control In The Condition Of Information Asymmetry

As an important productive resource, information is exerting great influence on the various aspects of the social life in the era of information economy. Nowadays, faced with keener and keener competition, the side that gets a full range of information will take the advantage to control the whole situation, avoid the risks and achieve the final success. On the contrary, the side that is in a disadvantageous position in getting information will be difficult in operation in the market economy and make itself faced with the risks of loss and defeat at any time. Hence, this study on how to reduce the risk brought about by the information asymmetry to the lowest level is of great and far-reaching significance to strengthen the ability of the participants of the market economy to take part in the competition of the market.As the product of the commissioned economy, the government audit is representing the government to perform the function of supervision and audit and playing a more and more important role in ensuring the healthy and orderly operation of the socialist market economy. In that audit is the product of the commissioned economy, there is naturally an asymmetry between the audit and the being audited. This asymmetry will affect the quality of audit and supervision and bring forth the audit risks. In order to build up the authority of the government auditand work as a qualified "night watchman" , the government audit must do a research and get a full knowledge of the mechanism of how the audit risks are produced in the condition of information asymmetry, and set down the ways and measures to reduce the audit risks.Based on the author' s working experiences, this thesis tries to analyze how the audit risks take place with George A. Akerlof and AMichael Spence 's theory on information asymmetry and put forward suggestions and measures on how to reduce the audit risks. The first Chapter tries to first introduce some basic definitions of government audit, and then introduce the definitions, characteristics and embodiment of the government audit risks, the differences between the traditional model of audit risks and the modern one and their respective influence. Finally it lists some control system of audit risks at the moment. The second Chapter introduces the definitions of "converse choice" , "mixed balance" and "signal" that are closely connected with information asymmetry, and the reason why the government audit risks come into being in the condition of information asymmetry. The third Chapter deals with two cases, which tells in detail how the government audit risks are produce in the condition of information asymmetry. The fourth Chapter gives some suggestions and measures on how to control the government audit risks on the basis of the analysis and cases mentioned in the previous chapters and the author' s working experiences on audit.