Research On Improving Audit Risk Model And Its Application

In the current situation, the business environment is constantly changing and the business organization structure had to change accordingly, thus business models are complicated increasingly. And still, economic globalization and technology continued development played a role in enterprises development and require higher level to audit. On accounting standards aspect, enterprises must improve accounting and daily business supervision and management. On audit standards aspect, CPAs respond the audit and disclosing responsibilities to management fraud and false information. Audit risk is increasing. Under this situation, traditional audit applications could not adapt to the requirement from current audit. New ways of audit must be developed to replace them. Thus, risk oriented audit (ROA) comes forth. the most important feature of the application is using new audit risk model: Audit risks=Risk of significant misstatement×Detection risk. This paper specifies the application of the model, and proves the effectiveness of ROA to detect audit risks. Providing scientific evaluation to risk factors, ROA model could help auditors make appropriate estimation and judgment, regulate audit risk and control audit risks below acceptable level to achieve the purpose of minimizing the audit risks.Firstly, this paper elaborates the basic meaning and related theory of audit risks and audit risk model and describes the evolution and characteristics of audit model. Through analyzing factors of audit risks, the identification functions of ROA could be recognized and the theoretical basis could be provided to construct new risk model. Through the application of audit model and the combination with fuzzy comprehensive evaluation applications, CPAs could make scientific demonstration and evaluation the factors of significant misstatements risks in financial statements, then quantify the risks to analyze the effects. Finally, through the specific cases combined with current application of ROA models, research on application of identifying audit risks by ROA and comprehensive analysis for the specific application of ROA model in practice, policy proposals could be brought forward.