Research On Cost Of Auditing Risk And It's Mechanism Of Transfer And Compensation In Accounting Firm

With the sustainable development of the industry of Chinese CPA, Chinese CPA has entered into the date of fully risk-oriented auditing. Management of audit risk is a very important aspect of management of accounting firms. With the increase of complexity in modern auditing matter, the risk of audit item becomes more and more high. Traditional management of audit risk regards risk expense as an unexpected or occasional loss. This attitude not only ignores the inevitability of audit risk in audit vocation, but also makes against risk control and cost accounting. Ignorance on cost of audit risk (CAR) results in the audit charge, which is reckoned on the base of audit cost, is under the natural charge level. Meanwhile, simply contributing CAR to an unexpected loss makes accounting firms to take up risk loss passively instead of probing into transferring and compensating CAR.This paper aims to bring forward CAR as a concept. On the base of systemic analysis on causation and factor of CAR, then the author establishes mechanism of transferring and compensating of CAR. This paper is divided into six chapters.The first chapter is a brief introduction in which we would clarify the importance of the CAR and transferring and compensating of CAR under the background of the high risk and the risk management trend which the public accountant firms face. On the basis of these, we would introduce the existing research of the CAR both in China and abroad. At the end of this chapter, author expatiate the innovation and limitation of this paper.The second chapter systemically introduces audit risk of CPA and clarifies the connotation of audit risk on the base of many other scholars'researches. Secondly, the paper introduces types and characters of audit risk briefly, offering advantage for classification of audit risk cost. Finally, the paper systemically analyzes causations of audit risk cost.The third chapter analyzes factors of CAR. Following the analysis in previous chapter, author gives CAR a specific definition. On this base, the paper divide CAR into two portions according to feasibility, one is management cost of auditing risk which is correspondingly certain, and one is loss cost of auditing risk which is uncertain. Then the author analyzes factors contained in management cost of audit risk and loss cost of audit risk detailedly and describes connections among these factors. Finally, the author clarifies hypostasis and character of CAR. Analysis on factors of CAR establishes base for transferring mechanism and compensation mechanism of CAR.The fourth chapter mainly discusses mechanism of transfer for cost of auditing risk(TCAR). This chapter is divided into three sections. In first section, the author clarifies the definition and essential of transferring of TCAR, discerns the gist in theory and mechanism of TCAR. In the second section, the author briefly analyzes the realism of TCAR in accounting firms and discloses that there is no transferring mechanism in accounting firms. In the third section, the author discusses how to establish mechanism of TCAR. The author advises transferring risk cost both inward and outward the industry. Founding on different main body, the paper brings forward different establishing means, for example, the author protests establishing industry risk investment fund on the base of CPA industry.The fifth chapter mainly discusses mechanism of compensation for CAR (CCAR), considering that mechanism of TCAR cannot transfer all of the audit risk cost. This chapter is also divided into three sections. The first section deals with elementary theory of CCAR, which contains definition, connotation and thereunder in theory of CCAR. The second part is the reality condition of CCAR. This part analyzes two reality conditions of CCAR, audit fee and system of occupation risk fund in order to prove that is urgent for building the mechanism of CCAR. The third part studies mechanism of CCAR from the perspective of the public accountant firm, which includes the characteristic, significance and the measures of occupation insurance.The sixth chapter is a study on the realistic problem of the CAR. First of all, the thesis makes some proposal on how to solve the problem existing in CPA's industry risk investment fund and insurance of professional obligation. Second, the author analyzes the contradiction between traditional accounting and the CAR. Finally, the paper innovates in the information disclosure of CAR that is disclosure on credibility.There are some innovations in this paper. First, the author establishes theory structure of CAR. Second, the paper systemically analyzes causations of CAR. Third, this paper establishes mechanism of TCAR, which contains several transferring ways. Fourth, this paper establishes mechanism of CCAR, which is not different from the way to compensate by charging. Fifth, the paper innovates in the information disclosure of CAR that is disclosure on credibility.There are many limitations in this paper. The author attributes the limitations to his uninspired academic research. He hopes the professors who read and criticize his dissertation can give his some constructive advice.