Identification,Evaluation And Response To The Risk Of Material Misstatement In Xintai Electric

The frequent audit failure cases in recent years show that the auditors did not attach importance to the risks of material misstatement in strict accordance with the auditing standards and the requirements of modern risk-oriented auditing.The procedures for identifying and evaluating the risks of material misstatement were in a form,it makes the phenomenon of management fraud can’t be detected.Major misstatements affecting corporate decisions can’t be identified,audit risks can’t be reasonably controlled,audit failure can’t be effectively contained,and the credibility of auditing profession is questioned.Therefore,the purpose of this paper is to strengthen the practical guidance role of auditing standards and risk-oriented auditing,to increase the importance of certified public accountant to risk of material misstatement,to strengthen the recognition of the risk of material misstatement by certified public accountants and to apply the assessment procedure,and to promote the adoption of reasonable CPAs.Effective auditing procedures respond to the company’s risk of material misstatement and reduce the occurrence of failed audits.This paper stands at the perspective of the CPA,taking the first delisting company of the GEM which called Dandong Xintai Electric(hereinafter referred to as “Xintai Electric”)as the research object,and “theoretical research—case introduction—The CPA’s recognition,assessment and response to the risk of material misstatement—the analysis of the problems and causes of the CPA—the CPA’s proposal to deal with the risk of material misstatement” is the research idea and the development of thesis.This article under the guidance of the audit criteria 1211,using PEST analysis method,case analysis method,qualitative analysis method from the audited entity and its environment six aspects of combing CPAs to identify the process of risk of material misstatement.Through the comparative analysis of financial indicators and the professional judgment of certified public accountants,the paper assessed the risks of major misstatements of the company and discussed the process of CPA’s handling of the risk of material misstatement.The study found that: CPAs have problems in the process of identifying,assessing,and responding to major misreporting risks which can be classified as "unrecognized material misstatement risk" and "risk of misstatement that is not properly dealt with".The reason why certified public accountants failed to reasonably deal with risk of material misstatement is the lack of professional ability of the CPA,lack of understanding of the audited entity and its environment,failure to reasonably evaluate the internal control of the enterprise,inadequate use of the audit procedure,and loss of audit independence.Combined with the analysis of reasons,the paper put forward suggestions for CPAs to deal with risk of material misstatement from five aspects,such as improving the professional ability and professional quality of certified public accountants,paying attention to the audit of internal control,strengthening the understanding of the environment of the audited entity and the application of risk assessment procedures,rational allocation of audit resources,and improving auditor independence of CPAs.