Research On Audit Failure Of Listed Companies On The GEM

The audit failure cases of Growth Enterprises Market(hereinafter as “GEM”)listed companies have been happened frequently in recent years.Therefore,audit industry and the GEM are gradually becoming unreliable and untrustworthy which lead to a result of credit crisis that would impact on the healthy and orderly development of them through the public and the investors.In order to find out the obstacles of audit industry,the paper is going to analyze from the aspects of CPA’s behavior and social environment in order to propose advices and suggestions which has practical significance of promoting a healthier audit industry and GEM.The paper will use case analysis method to analyze the audit failure issues of GEM listed companies by combining with specific case and theoretical references.First of all,the paper will present a framework which illustrates the background information,the significance,and the purpose of the paper.Next,by summarizing the relevant theories and typical case study from both China and western countries,the paper will give a particular definition of audit failure and try to distinguish the situation of audit failure as well.After defined what is audit failure,the paper is going to deep down into introducing the specific case which will be used in the paper.The case of “Geeya” audit failure is related to two subjects--GEM listed company “Geeya Technology” and CPA firm “SHU LUN PAN”.By looking at this case,the paper will discuss three ways of fraud of Geeya Technology: 1)making up cash at bank;2)making up construction advance;3)making up revenue;and these three ways will be discussed respectly.As mentioned above,CPA’s behavior and social environment are the two main obstacles which result in audit failure.Thus,these two obstacles will be analyzed in this section.From CPA’s behavior’s aspect,four points should be mentioned: 1)the insufficient audit risk assessment;2)the insufficient audit procedure;3)the insufficient professional skepticism;4)the influenced audit independence.From social environment’s aspect,three points should be mentioned: 1)the unbalanced relationship between Geeya of SHU LUN PAN;2)the imperfect GEM regulatory system;3)the lack of penalties.Last but not least,the paper will give suggestions and advices according to the problems which are debated above.The possible suggestions from CPA’s behavior’s aspect: 1)the CPA needs to assess audit risk carefully,enhance audit on going concern ability and internal control of GEN listed company;2)the CPA needs to popularize new audit technique which suits GEM audit and train high level audit as well.From social environment’s aspect: 3)increasing the penalties;4)improving the audit appointment system;5)improving the public supervision mechanism.