Research On The Risk Of Local Government Debt Replacement And Its Audit Management

In order to cope with the increasingly significant risk of local government debt,the new budget law adopted in 2014 amended the relevant provisions�local government bonds should not be issued by the local government except as otherwise stipulated by law and the State Council,and proposed firstly the concept of the replacement of the stock debt.In 2015,the central finance ministry gradually began to implement the policy of local government debt replacement.And the provincial governments respectively got the quota of stock debt which can be replaced by the local government bond that allows some local debts with short-term and high-interest for repayment to be converted into long-term and low-cost local government bonds.The policy of debt replacement effectively alleviates the pressure on local governments to repay debts by declining interests and extending terms for repayment.With the continuous promotion of local government debt replacement,China's local government debt risk has been significantly controlled.However,as a kind of emergency measures,the policy of local government debt replacement is not mature,and has the characteristics of financial risk financially,which may lead to a variety of risks in the process of debt replacement.These risks will not only affect the implementation effect of local debt replacement,but also further trigger systematic financial risks,thus threatening the security and stability of the financial system in China.How to control the risk of local government debt replacement and prevent systemic financial risks has become a severe test faced by our government departments.In this paper,the background of the article is firstly introduced.The policy of the local government debt replacement in China can deal with the local debt risk promptly.But the risk of local government debt replacement lacking supervision may eventually evolve into systematic financial risk.Using audit method to manage debt replacement risk can effectively prevent systemic financial risks,which is in line with the essence of the report to the 19 th.Secondly,this paper introduces the related contents of local government debt replacement policy,audit theory and computational experiment which build a theoretical foundation for the in-depth development of the thesis.Thirdly,on the basis of analyzing the risk of local government debt stock in China,it summarizes the risk sources in the implementation of local government debt replacement,and analyzes the impact of the debt replacement risk on the financial system.Then this paper puts forward a new way of controlling the risk of local government debt replacement to prevent the effect of systemic financial risk by audit management.Fourthly,based on the computational experiment method,the evolutionary game theory is used to describe the strategy choices of the government departments and commercial banks when they face of the risk of debt replacement.On this basis,the evolutionary game process between government departments and commercial banks is simulated.From the quantitative point of view,the necessity of implementing audit governance for the risk of debt replacement is demonstrated.From the results of the calculation experiment,it can be concluded that in the game process the commercial bank will gradually develop the strategy direction of replacement as soon as the government chooses to implement audit management.And improving audit mechanism and the effectiveness of risk management can greatly shorten the time for government departments and commercial banks to evolve into positive strategies.Fifthly,we use the theory of "immune system" to conceive the overall framework of local government debt replacement risk audit governance.Then this paper gives policy advices from three aspects:perfecting the audit system to strengthen the function of risk revealing,improving the effect of governance to optimize the function of risk self-stability and building the early warning mechanism to realize the function of risk prevention.Lastly,we summarize results and shortcomings of this paper,and hope to have a contribution to the future research of managing local government debt replacement risk.