The Research Of Audit Risk On Mezzanine Finance Of The J Real Estate Group

Mezzanine finance is a financing method that means in terms of risk and return between senior debt and equity financing.Compared with ordinary financing methods,mezzanine finance is more flexible,and achieve a variety of ways.Though the way of mezzanine finance,not only the enterprises can obtain loans,but also can achieve a lower asset-liability ratio,beautify the financial statement.In recent years,the enhance of macro-control in the area of real estate industry in China make it difficult for the companies which want to get loans from the banks,for this reason,more and more companies try to get funds through the way named “ming gu shi zhai” in China means classified as equity but effectively like debt,which is worse for the stability of the capital market,also make a big challenge to the traditional audit methods.In 2013,Gezhouba Real Estate Corporation got capitals by the mean of fake equity which combine with stock owner trust,by the lack of caution made the auditors questioned by the parties.With the found of debt default in February 2015,triggered some a mandatory prepayment terms that the J Real estate corporation couldn't repay the debts in time,lead to a series of debt default,which causing losses to businesses and investors.However,the P public accountant firm,didn't find the mistake of the classification error in the 2013 financial statement that issue an audit report of unqualified opinion.With the aggravation of debt crisis,the P public accounting firm also faced a huge compensation and administrative punishment.Throughout the audit failure cases of mezzanine finance in real estate recent years,traditional audit methods cannot fundamentally prevent the risk of mezzanine financing of real estate enterprises.Based on the pecking order theory,theory of control right,financial repression theory and audit risk model,reference to the recent years on a large number of real estate mezzanine financing and audit risk of domestic and foreign literature,the latest authoritative laws and regulations,select J real estate group mezzanine financing audit as the study case,a detailed analysis of some of the problems at the accounting firm of mezzanine financing this innovative financing audit will usually exist,further study of the causes leading to these problems,and put forward recommendations for prevention the audit risk of mezzanine financing in real estate companies.First of all,this paper briefly introduces the real estate industry,it is believed that the real estate industry of our country has the characteristics of strong regional,long investment cycle and high risk,as well as sensitive to macro policy and capital cost.at the same time,through the analysis of the current financing situation on real estate enterprises,it is found that there are many problems such as large scale of financing,financing difficulty,single financing channel and the pressure of debt repayment.Due to the particularity of real estate industry and financing,the mezzanine financing innovation mode in the rapid development of real estate enterprises,which also triggered a new audit risk,audit risk of mezzanine financing.Secondly,through the analysis of the basic situation,operating status and capital structure of J real estate group,it is found that J real estate group is a typical real estate enterprise.After nearly 20 years of development,the organizational structure is stable,but the operating conditions deteriorate in recent years by the impact of the real estate policy control.Due to the rapid development in the past few years,many projects are in urgent need of funds for subsequent construction.And because of the company's own high asset liability ratio caused by financing constraints,assets are more difficult to achieve inventory,so the company got fund with mezzanine financing in the year of 2013.The P accounting firm in the 2013 annual audit of J group did not find the mezzanine financing of the audited units,resulting in an error in the audit report.Again,this paper further studies on J real estate mezzanine financing audit case,that causes P accounting firm failure is the mezzanine financing characteristic of the real estate industry audit risk,also has the generality of the audit risk,there is a new type of audit risk factors implied in the mezzanine financing.Specifically,the audit risk source specific real estate industry to demand the real estate enterprise funds lead to large amount of external financing is diverse and complex,long project cycle to investment and financing problems,the project involves a large number of scattered and liquidity;the general audit risk comes from the lack of due attention in the audit planning stage,the inappropriate implementation of the audit procedures,the quality is not in place;mezzanine financing audit risk stems from the mezzanine financing itself,the outside world,the Ming shares of real debt,as well as the definition of vague regulatory loopholes.Finally,on this basis,the paper puts forward some countermeasures to prevent the risk of mezzanine financing of real estate enterprises.On the one hand,the real estate industry general audit risk,suggests CPA firms to enhance the understanding of the real estate industry external environment,according to the characteristics of the real estate industry to develop audit procedures,strengthen the audit professional competence and improve the auditing quality control system;on the other hand,for the mezzanine financing audit risk,audit staff recommended that firms strengthen the essence of new financing tool of economic concern,a thorough understanding of the purpose of financing funds and pay attention,confirmation and analysis procedures and consider whether the depth of excavation and make full use of the expert work etc..In short,with the continuous improvement of Chinese financial system and the increasing demand for corporate finance,more and more innovative financing tools will be created and used by the enterprises,because of its complexity and concealment,it will bring unprecedented audit risk to the auditors.The auditors should not only focus on the field of general audit,but also should continue to understand the overall environment of the real estate industry,develop appropriate audit plans for the changes,and reduce audit risk to an acceptable level.