Research On Governance Of Auditing Failure In Related Party Transaction Fraud

Since the reform and opening,the market economy system of China has been continuously improved and our stock market has been made great strides.However,lots of companies listed its higher-margin assets in order to raise funds in the capital market,which resulted in the complicated relationships between the listed companies and controlling shareholders.Meanwhile,a large number of cases of related party frauds happened in the stock market,such as the Green Earth incident,which caused tremendous losses to investors and aroused the public's keen concern about the related party frauds.At the same time,the frequent audit failures have deeply disappointed the public and begin to question the CPA's independence,impartiality,integrity and professionalism Image,leading to the CPA profession is facing a huge crisis of confidence.The article adopts normative and case analysis methods to conduct research and analysis.Through the arrangement of relevant literature of the audit failure of related party fraud at home and abroad,the article explains the concept and related theories of the related party's fraud auditing in detail.Combined with the reports on penalties issued by China Securities Regulatory Commission in 2010-2017,author analyzes the reasons for accounting firm's audit failure on related party fraud,including the following three aspects.The first is the auditing business level,which includes the issues of risk assessment,control testing,and substantive procedures.The second is the occupational ethics level,which explains the main reason for the lack of'independence of auditors is the oversupply of the audit market.The third is the quality control level,which includes the issues of audit project team assignment system,business acceptance,and business review quality control.In response to the issue,author proposes corresponding governance measures.At auditing business level,firms should i nnovate auditing techniques,conduct in-depth investigations of internal and external corporate environments when implementing risk assessment procedures,and pay attention to the effectiveness of related party approval procedures when performing control tests,and should pay attention to sexual procedures,communication procedures and inquiry procedures.In the professional ethics level.firms should strengthen the training of professional ethics and professional competence of auditors.In quality control level,the firm perfect the system of audit project team assignment,business acceptance and business review system,and establish a responsibility system for audit failure.At the same time,the author analyze the reason of Pengcheng Accounting Office failed to find out the related party fraud of North Health Pharmaceutical.The article analyzes the reason of the auditing fraud of related party fraud from the accounting firm's point of view,which is helpful to clarify the key contents and existing problems of auditing related party fraud.It has certain reference function for perfecting the auditing theory research of related parties and also helps the accounting firm to face the increasingly complex market economy environment and improve the quality of audit work to avoid audit failure.