Analysis Of Beijing Xinghua Accounting Firm Audit Failures On XTEC

With the developing of market economy and capital market,separating from ownership and operation,leading to the unbalance between the owner and administrator about accounting information,demand for auditing is increasing heavily.Thus,the owner and the public investor pay more attention to the quality of audit report.Except the above-mentioned factors,more and more companies pin their hopes on listing to acquire funds and extend their business.Because of the lack of listing qualification,the management tries to polishing the financial report,inflating profits and cutting the cost to make it meeting the requirement of listing.The financial fraud of the listed company rises one after another,and the same as the audit failure of accounting firms.It makes a huge negative effects on capital market,disturbing the realization the optimization of resource distribution,dampening the investors' enthusiasm.This article is selected from XTEC which is obliged as the case study.The author will analyze deeply and roundly the case of Beijing Xinghua accounting firm audit failure by the literature research method and the case study method.At first,summarizing the literature review about financial fraud and its factors,CPA audit failure and the preventative measures.It will expound the writing ideas and specific methods and framework.On the basis of definition of audit failure,the author will analyze the relevant definitions,such as business failure,the risk of audit and financial fraud,they are all in very close contract with audit failure.Also macroscopic elaborating the causes of audit failure in the audit industry.As follows,the improper audit procedure,the control of quality of service is not in place,the auditee's financial fraud and the force of supervision is inadequate.At the same time,introduction to the theoretical explanation of audit failure—Principal-agent theory,asymmetric information theory and economic man hypothesis,which are the theoretical basis on this article.Secondly,reviewing the case of XTEC,introducing the relevant punishment,by consulting the related data,such as,“Prospectus of XTEC”,“XTEC: the notice of prior year of the major accounting error corrected and adjusted”.And the detail of financial fraud,that is Reduce account receivable by external loans,equity fund and falsifying bank bills,undisclosed information about using capital by related parties,readjust prices on raw materials to inflated profits.Meanwhile the author deeply analyzes the overview of audit failure of Beijing Xinghua accounting firm,such as no notice to the large denomination on receivables and payables,no alternative test method used to the non-response clients,pay no attention on the bank customer abnormal cases,no properly evaluation on the validity of internal auditee.Afterwards,on the basis of the above theories and analysis of the case,we could make the conclusion that the causes of Beijing Xinghua accounting firm audit failure by searching for related data.In terms of the CPA and its accounting firm,including CPA pay no vocational skepticism to the abnormalities on receivables and payables and incompetence,the information disclosure is non-normatively.In the aspect of the auditee,including the accounting firms are poor in management,the malicious frauds of management.In terms of the outside environment of the audit industry,including the inadequate inner-controlling system,audit industry supply-demand disequilibrium and fierce competition and the insufficient government punishment.In the end,On account of the above analysis,proposing the Conclusions and enlightenment of researching Beijing Xinghua accounting firm audit failure.The Conclusions are attending to financial fraud and inadequate inner-controlling system are the root cause of audit failure,incompetence of CPA is the direct cause of audit failure,weak supervision and poor occupational environment are the external causes.The enlightenments are mainly including enhancing the auditee's internal audit quality and the governance of management,intensifying the audit occupational level and skepticism,establishing the double check system and severe punishment and precise supervision.