Research On Audit Strategy Of Zhangzidao Incident Under Modern Risk-oriented Model

According to the requirements of auditing standards,the current stage of China’s auditing is the use of modern risk-oriented auditing,which is divided into the audit planning stage,risk assessment phase,risk response and completion stage.The CPAs could use a reasonable auditing strategy at all stages to control inspection risks,and thus reduce risk of audit.Furthermore,in recent years,it has been found that there are many cases of financial fraud in listed agricultural companies in China,and various types of fabrication are available.The CPAs was repeatedly punished by the CSRC for auditing agricultural listed companies due to unreasonable audit strategies.As a result,investors questioned the authenticity of the financial reports of agricultural public companies and put forward higher requirements for the quality of CPA work.The financial incidents of Zhangzidao company are very representative among listed agribusiness.Since 2014,the firm has written off scallops and made impairment provisions,which has caused a huge negative impact on its operating conditions.This behavior was punished by the CSRC in 2019.However,in the audit process in recent years,the accountant did not find any fraud in the corporation,which reflected to some extent that the CPA did not use the audit strategy reasonably in the process of using risk-oriented audit.Eventually,The audit process is based on modern risk orientation,with Zhangzidao as a case.It is very important to study how audit strategies could be implemented at various stages in the audit process of listed corporations.Secondly,this paper compares and analyzes agricultural and non-agricultural audit opinions and penalties of listed companies in the past four years from 2015 to 2018,and concludes that the CPAs of listed agricultural companies are more cautious.At the same time,the probability of audit failure of agricultural listed companies is greater.This type of company frauds mainly through inventories,income,costs and related party transactions.In the case of audit failure,CPAs’ audit strategy problems are mainly concentrated in the risk assessment stage,risk response phase and audit completion stage.Then,based on the analysis of the typical case of Zhangzidao,starting from its main business,the process of large-scale provision for impairment and write-off of inventory and the audit process of annual reports were analyzed.It was found that the accounting firm did not strictly perform preliminary business activities,did not reasonably apply analytical procedures during the risk assessment phase,and did not conduct control tests and substantive procedure during the risk response phase.As a result,Dahua Certified Public Accountants and its certified public accountants did not find any related problems in Zhangzidao during the audit.Finally,this article comprehensively analyzes the audit failure cases of listed agricultural companies.Start with each stage of modern risk-oriented audits to address the causes of audit failures.It is proposed that the accounting firm should strengthen the assessment of the independence of the project team,business capabilities,and time resources,improve the assessment of the integrity of the management of agricultural listed companies,fully implement analytical procedures,comprehensively use analytical methods,and need for a reasonable overall response to major misstatement risks.For high audit error areas,control tests and procedures are implemented.Relevant suggestions such as improving the auditing system of accounting firms’ drafts are used to improve the auditing strategies of listed agricultural companies and provide reference for improving auditing quality.