The Research On Management Fraud-based Auditing Based On The Economic Perspective

Enron event, Yin Guang Xia event and other series of management fraud cases have shocked the whole world, therefore, management fraud has become the major reason for the errors and malpractices in the financial statements. At the same, since the CPA firms are in charge of fraud companies'audit activities, the investors who suffered huge loss begin to hold the CPA firms'liable. Therefore, in order to deal with the change of requirements in the auditing of management fraud and lower the legislation and public pressure, the CPA firms upgrade the audit services and improve the supervision for management fraud. Management fraud-based auditing is produced under such background. Based on the optimization and reasonable distribution of audit resources, the improvement of audit techniques and the perfection of audit procedure, management fraud-based auditing is more relevant and inhibited when compared with the past auditing modes. Through the analysis of the diversity and concealment of domestic and foreign enterprises'management fraud, as well as the CPA firms'auditing failures, which result from management fraud, this thesis reveals the patterns of management fraud. Also this thesis elaborates the necessity of carrying out management fraud-based auditing by analyzing two points: first point is that the management fraud is the precipitating factor of the production of management fraud-based auditing and the second point is that management fraud-based auditing contributes to the revelation of management fraud. By employing Principal-Agent Theory, Asymmetric Information Theory, Supply-Demand Theory and Game Theory, this thesis analyzes the following problems: Current fraud auditing standards and regulations have effects on auditing quality supplies; auditing resources affect the supply of management fraud-based auditing; the game between management and CPA firms; management and audit units have recessive principal-agent relationship; there also is asymmetric information between managers and auditors and analyzing the reasons. Then the thesis proposes several measures, such as that auditing standards and regulations should be perfect so as to constrain auditing; supply should be enhanced in order to achieve reasonable configuration of management fraud resources; sorting out the principal-agent relationship between the audit units and management; Strengthening information disclosure between management and the CPA firms and optimizing the auditing supply game between management and the CPA firms. Finally, this thesis gets the teaching though the case studies of the management fraud of Jiu Fa Co., LTD: only by solving the problems exiting in fraud-based management auditing, management fraud can be stopped more effectively and the enterprises and the CPA firms can get mutually benefits.