| Along with the developing of China's economy,the listed companies spring up on the market.With the increase of per capita disposable income,many people allocate their excess savings to invest in listed companies.Therefore,the public also pay more and more attention to the financial situation of enterprises,so as to make investment decisions based on financial information.The right of management and ownership of an enterprise are separated,so the investors cannot participate in the operation of the enterprise,which makes the investors have less information about the enterprise's information,while the managers have more.It leads to the information imbalance,therefore the profession of CPA comes into being to rebalance.CPA can help enterprise investors obtain more financial information of the enterprise and supervise its daily operation.The audit results of CPA are closely related to the interests of many investors.However,in view to the cost,business level,time and other factors,CPA do not strictly follow the audit requirements when conducting the audit,and the audit procedures are not execute properly,which reduces the quality of audit services and leads to the audit failure happen frequently.Recently there are a lots of audit failure cases in our country,the public started to doubt the quality of accounting information,then trust declined which against the reputation of the auditing profession,and it exerts a negative effect on the credibility of CPA.The research method of this paper is theoretical case study method,which based on relevant theories of audit failure,selects Ruihua Certified Public Accountments to analyze the typical case of 2017 annual report audit failure of Yatai Holding Group,drawings relevant conclusions to avoid similar audit failure of other CPA and firms through this study.Based on the theory of audit failure,this paper reviews the research status at home and abroad.On this basis,the concept and characteristics of audit failure are introduced,and the causes of audit failure and its impact on society are analyzed.This paper argues that the emergence of audit failure is affected by three factors,namely,accounting firms and their CPA,auditees and audit practice environment,and the impact of audit failure will also be reflected in these three aspects.Next,the case study on the failure of the audit of Yatai by Ruihua is introduced.Yatai is the enterprise whose main business is real estate development,its internal governance structure is not yet perfect,and it had been published by the China securities regulatory commission.Ruihua is one of the leading large accounting firms in China.Its merger in 2013 affected the quality of audit to some extent.In the past two years,Ruihua has been punished by CSRC frequently.In this case,Ruihua and its CPA have problems in executing audits procedures properly in internal control,quality claim payment,longterm equity investment and operating income,etc.Ruihua failed to strictly follow the audit standards,and issued a unqualified audit report for the Yatai which was inconsistent with the facts.It failed to find out the financial fraud of the Yatai,which was finally investigated and punished by China securities regulatory commission,resulting in the failure of this audit.Through the analysis of the reasons for the failure of the audit,it can be found that the auditors of Ruihua are not competent enough,and they do not keep a reasonable attention to the particularity of the audited company.Continuous audit also leads to the doubt of the audit independence of the firm,and the merger of the firm affects the audit quality control of the project to some extent.From the analysis of external reasons,financial fraud,internal control failure and governance structure chaos in Asia Pacific industry also created some artificial difficulties for the auditors of Ruihua.At the same time,the fierce competition in the audit market,the multi-supervision mode,the light crackdown and the imperfect law also contributed to the failure of the audit.In the last part of the paper,the case is summarized and the following conclusions are drawn: the direct cause of the audit failure is that the certified public accountants did not strictly follow the guidance of the audit standards in the audit process.The indirect cause of the audit failure is the quality control defect of the audit project of Ruihua.The root cause of the audit failure is the financial fraud of Yatai.The external cause of the audit failure is the chaos of the market environment and regulatory defects.Then,according to the conclusion of the case,the paper puts forward feasible countermeasures.First,auditors must strive to improve their professional competence.Secondly,accounting firms should strengthen the quality control and review of audit services.Thirdly,attention should be paid to improving the internal control system of listed companies and giving play to the function of internal audit,so as to reduce the incidence of financial fraud.Finally,administrative penalties for corporate fraud and violations by accounting firms should be increased to reduce the occurrence of violations by accounting firms,the civil compensation legal system should be improved,and corresponding standards for audit failure compensation should be formulated to better avoid audit failure. |
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