Research On CPA Audit Collusion And Governance

Since the restoration of the Certified Public Accountant system in China in the 1980s,the CPA practitioners have been rapidly improved in terms of quantity,professional competence,and business development.All of these have also provided guarantees for the sound operation and rapid development of China's capital market.The audit service provided by the CPAs has been regarded by the public as the firewall that can best resist the financial fraud of listed companies,and it plays an active role in safeguarding the sound operation of the capital market and preventing the occurrence of financial fraud.However,in recent years,there have been numerous cases which CPAs have not disclosed or even actively assisted the audited units in fraudulent practice in China's capital market.This not only endangered the credibility of the auditing industry,but also caused the serious distortions of the audited financial information in the capital market,misleading investors' investment decisions,even distorting the resources allocation,and then caused harm to the steady development of the national economy.There are a number of cases involving audit collusion in the cases of financial fraud in China's capital market in recent years,so it's urgent for regulators to effectively prevent and control such events.Therefore,combining related theories,the author tries to analyze the behavior and reason of the audit collusion from the perspective of the CPAs by studying the typical cases in China's capital market,and puts forward some countermeasures to prevent and govern the audit collusion based on the analysis.There were continuous audit collusion since the XTEC's material application in 2012 IPO meeting until annual report audit work in the following two years,this case has typical representativeness.Using case study method,this paper analyzes the case of XTEC.Firstly,we summarize of the concepts and findings of audit collusion based on the rational economic man theory,principal-agent theory,information asymmetry theory,game theory,and fraud triangle theory.Secondly,we presume the fact of audit collusion,which is selective ignorance of extremely low-end counterfeiting methods,by analyzing the behavior and reason of the audit collusion from the perspective of the CPAs and accounting firms.Based on the fraud triangle theory,we find that the audit collusion is co-led by the economic benefits,the opportunities provided by the vulnerability of market competition,issuance review mechanism,audit charge and appointment system,and connivance of insufficient supervision and light punishment.Finally,from the perspective of pressure/demand,opportunity,and excuse,this paper proposes various goyernance measures such as improving the corporate governance structure of listed companies,improving the operating mechanism of the audit committee,improving the issuance review system and strengthening supervision,so as to provide reference for relevant departments to formulate policies.