Research On Local Government Debt Risk Audit In China

Local government debt is currently a hot topic in China, and the whole world is concerned with it. China’s local government debt is expanding, and it is no doubt accompanied by potential risks which cannot be ignored. Auditing has the function of serving as China’s economic oversight, as a third party with a strong independent audit used to determine the credibility and social influence which is also growing in all sectors, but also used to reveal the continuously deepening problems in various fields. This paper studies the relationship between local government debt issues with economic security and social stability of China. This paper also looks at the crucial role of local government debt risk audit in guarding against the risk of local government debt, and ensuring healthy and orderly economic development. Based on agency theory and the theory of risk orientated audit, perspectives on China’s local government debt risk audits were studied.Firstly, this paper carries out an analysis on the basis of unraveling and summarizing relevant literature on the topic, combined with an account of China’s actual situation. It points out the main body of China’s local debt in addition to local governments and agencies, including enterprise institutions, which all belongs to local government debt. This paper believes that to date the total amount of government funding is insufficient to repay the amount of debt that the government needs to pay back, and therefore the risk of local government debt has reached a critical point.Secondly, according to the theoretical basis above, by looking at33published copies of "Announcement of Local Government Debt Audit Results", debt structure, debt growth, the sources of funds, this paper carries out a quantitative analysis on China’s local government debt, summarizing the status quo of China’s local government debt and potential risks at this stage. Based on the results of the data, this paper also indicates that the financing platform and land leasing system are the main points for the risk of local government debt, and will ultimately lead to financial risks.Thirdly,according to the status of China’s local government debt analyzed, and the main risk points determined, the belief is that the priority of current local government debt risk is to improve the development of auditing, and more audit focused evaluation methods respectively. This can be separated into:financial platform auditing and land transfer auditing as two key aspects of the audit to supplement the proposed evaluation method for the balance of the current evaluation methods which need to strongly develop auditing. This method is the development trend of future audit evaluation methods.Finally, according to the period of change in policies written in this paper, a summary is made on the development and changes for the new situation of local government debt. On the basis of this, new suggestions are put forward for improving local government debt audit work in order to further strengthen China’s local government debt risk audit.