Case Study On The Audit Failure Of JH Group By ABC Accounting Firm

At present,the capital market of China is booming.In order to "take a piece of cake" in the capital market,many enterprises take a variety of financial frauds to beautify their financial statements and the financial position,operating results and cash flows of the enterprises.These enterprises seriously infringe the interests of investors and disrupt the stable order in capital markets and make a huge impact on the development of the enterprises themselves.Accounting firms as "economic police" should objectively evaluate the financial information of enterprises and issue appropriate audit opinions.However,it has exposed that many audit failures exist in financial fraud cases.This phenomenon makes the public's trust in accounting firms decline sharply and hinders the development of accounting firms.In recent years,the supervision to third-party intermediary agencies by the CSRC is getting stronger and stronger.How to improve the audit quality to avoid the audit failure as far as possible is the urgent problem to be solved by the current accounting firms.This paper combines the literature research method and case analysis method.Based on the domestic and international research on audit failure,this paper elaborates the definition of audit failure and explains why the audit failed from a theoretical perspective including risk-oriented audit,principal-agent theory and rational economic person hypothesis.Then the paper introduces the background and the process of mendacious reorganization of JH Group and analyzes the financial fraud measures and results of JH Group.This article describes the consequences of the audit failure of ABC Accounting Firm.Combining with the fraud,This article explores the reasons for the audit failure of ABC Accounting Firm in three aspects.There are unfavorable competition among accounting firms.Some certified public accountants failed to maintained the professional skepticism and concerns.They are short of career competence and failed to meet the requirements of auditing standards.The governance structure of JH Group is flawed,the new business model is difficult to audit,the concealment and professionalism of financial fraud are high,and the internal personnel do not cooperate;the supervision of related institutions is weak and the penalty is slight.In order to keep the stable development of the accounting firmsin an environment which full of fierce competition and increasing supervision.According to above reasons of the audit failure,the article draws the final conclusions after providing the specific precautions from the three aspects of accounting firm practice,accounting firm risk aversion and social environment and draw the final conclusions.