Audit Risk In The Risk-based Audit Model And Guide Research

Since 1990s, the audit environment of certified public accountant has greatly changed, the economic environment becomes more and more complex day by day, the enterprise bankruptcy risk and the financial report fraud risk are increasing constantly, which have resulted in the increasing audit risk. At the same time, the fierce competition of the audit service market requests the accounting firm enhance audit efficiency, reduce the audit cost and increase audit service value. Under this circumstances, risk-oriented audit method(ROAM) which adapts with the audit environmental variation arises. Auditing-risk is just the core of the relative studies and the "orientation" is the very beginning of ROAM. The correct understanding and applying of the audit risk model and deciding appropriate orientation is the premise in controlling the audit risk and plays an important role in reducing the audit risk.So far, there have been controversies in defining the core concept of risk-oriented—"audit risk" and there are different views of the entering point of the risk-oriented audit application—"orientation" in our auditing theorists. As we are vigorously implying ROAM at present, correctly defining of its core concept, all-round constructing its audit risk model and studying its risk-oriented indexes have much practical significance.This article is divided into four parts .The first part summarizes risk-oriented audit and analyzes the developing background of the risk-oriented audit theory and actual reason for its appearance. It also introduces the development of the orientation index, so that it is easier for readers to get a general profile of risk-oriented audit and also easier for me to develop my personal opinion in the later parts. In the second part, I believes that it's better to study and judge the core before setting up risk-oriented audit system. The composition of a subject depends on a clear definition and structure of its core concept. Under this guide, this part focuses on two aspects: Firstly, suppose that the auditing subjects are rational and give a clear definition on "risk" for risk-oriented audit and make a deep analysis on the meaning of audit risk which is confusing, and put forward an assumption concerning setting up a new concept—audit operation risk; Secondly, amend the audit risk model and introduce the legal risk basing on the existing audit risk model and the process of the audit operation risk. The third part firstly analyzes the existing oriented model, then put forward the idea that ROAM is not only oriented to material misstatement risk, but also oriented to the legal risk, which should be referred as "double oriented". This part also makes a tentative research on the basic operation procedure of the "Double-oriented" and the impacting factors of material misstatement risk and the legal risk. The forth part discusses the problems we do have in our audit operation through a real case and make individual recommendations.