The Case Study Of LY Ltd.’s Audit Before Listing On The NEEQ

The NEEQ, commonly known as the "new three board", is a national over-the-counter market with approval by the State Council. As an important part of the OTC market in China, the NEEQ provides an important platform of financing and private placement for small and medium-sized enterprises. Thanks to loose listing conditions and market-based auditing mechanism, a large number of high-tech and promising enterprises have listed on the NEEQ and injected new vitality into the capital markets. Most of these enterprises set up no more than three years, and belong to the category of the small and medium-sized enterprises.The pre-condition for enterprises to list on the NEEQ is:At first, the enterprises need to be restructured into the stock corporations with the help of securities trader, auditors, lawyers and appraisers. Than the qualified accounting firms should issue audit reports for records. After listing on the NEEQ, the stock corporations must disclosure of annual audit report timely at the end of each year, and these things are all done by the accounting firms.The entry threshold of the NEEQ market is low, which makes the scale and the quality of the listed companies are uneven. At the same time, the listed companies still have some widespread problems such as weak financial foundation and imperfect internal control system, which will increase the financing risk of the NEEQ market. The audits play a significant role for enterprises to reduce their operating and financing risk, as well as supervising their compliance. Therefore, it’s necessary for accounting firms carrying out a comprehensive and high-quality audit to enterprises before listing on the NEEQ. But in the actual audit cases, the audits for listing on NEEQ exist many problems. For example, the time for on-site audit is too long, the scope of audit is limited, the competence of the audit director is not enough, and so on. Therefore, there is a need of in-depth study to promote the healthy development of the audits for listing on the NEEQ.This paper is divided into four parts:The first part is an introduction. Introducing the selected topic background, research purpose and meaning, summarizing the main research contents and research methods in this paper. The second part is the case description. Taking the LY Ltd.’s audit case as the research object which was carried out by OP accounting firm, providing a brief introduction of LY Ltd.’s basic situation as an auditee, and elaborating the audit process for the analysis below. The third part is the case analysis. Appling theoretical knowledge to analysis this audit case, summarizing the problems of OP accounting firm existed in the audit process, and analyzing the causes of these problems by an in-depth analysis. The fourth part is the countermeasures and suggestions. Analyzing and summarizing the results of case analysis, and putting forward some enlightenments and suggestions with the existing research situation for improvement.