Research On The Audit Of Profit Forecast Of Merger And Acquisition

Nowadays,the system for disclosing profit forecasts has become a core part of information disclosure in Chinese listed companies,but still has some problems in auditing profit forecasts.Apart from investors,corporate managers also need information about profit forecasts verified by certified public accountants,in order to maximize interests of all parties.In this aspect,it is in line with previous objectives of auditing financial reports.However,there are significant differences between certified public accountants' verification of profit forecasts and previous financial auditing in their objectives and methods.Corresponding rules about auditing procedures and basic assumptions have been specified in Chinese CPA Standards on Other Assurance Engagements No.3111 – Examination of Prospective Financial Information.For instance,written documents for basic assumptions on auditing profit forecasts,availability of adequate reasonable supporting evidences,judgement on if basic assumptions are made based on true reasonable materials,and audit opinions have been generally identified.However,other rules still appear to be too generalized.In this paper,an attempt is made to theoretically improve audit criteria.After reading lots of literature,it has been discovered that no one has analyzed forecasts of profits from merger and acquisition of enterprises,so the author intends to intensively explore auditing of profit forecasts by exemplifying an enterprise as a case from the perspective of auditing forecasts of profits from merger and acquisition.In terms of its outline,this paper firstly reviews development of related basic theories and auditing systems.Secondly,it specifies keys and difficulties for auditing profit forecasts to discuss their special features.Subsequently,LY is taken as example to point out problems with Chinese basics for preparing financial statements for auditing profit forecasts,basic assumptions,forecast models/parameters,auditing procedures,attainment of auditing objectives and assurance of auditing quality.At last,suggestions are put forward for improvement from the perspective of audit criteria,certified public accountants and practical auditing.To improve audit criteria,it is proposed in this paper that it is necessary to compulsorily disclose complete evidences of assumptions,subdivide disclosed information and identify certified public accountants' responsibilities.Besides,certified public accountants are suggested to make reasonable auditing plans,highlight auditing procedures,cooperate with others across industries and improve their own qualities.As to practical auditing,it is necessary to judge if basic assumptions for profit forecasts by an audited enterprise are reasonable,if accounting policies for profit forecasts are appropriate,if profit is forecast according to basic assumptions,or if profit forecasts have been properly conveyed and fully disclosed.This paper is possibly innovative in several aspects as follows.Firstly,Chinese scholars have begun to explore profit forecasts very late.Much research has been performed based on some foreign mature theories and models,but hasn't achieved any real outcome.In investigating auditing,researchers have mostly compared auditing rules and audits,but seldom explored audit criteria.In this paper,some personal suggestions are put forward in view of auditing deficiencies.In addition,audit criteria for profit forecasts are examined and analyzed.Secondly,this is the first time that auditing of profit forecasts is intensively studied from the perspective of auditing profit forecasts for merger and acquisition of an enterprise,major problems with the auditing are pointed out,and corresponding solutions are put forward.Therefore,this paper is effective for improving deficiencies in Chinese auditing for profit forecasts and offers more useful investment opinions to Chinese investors.