Case Study On IPO Audit Failure Of Shinewing Certified Public Accountants To Huaiji Dengyun Auto-parts Company Limitied

With the development of Chinese socialist market economy,the securities capital market has also shown a good development trend.More and more companies want to go public and get financing in the securities market.The investors,as the existence of information asymmetry in the securities market,are only able to determine whether the company is worth investing through the public information of the proposed IPO company.In order to maintain the economic order of the securities market and protect the interests of the public,it is particularly important to conduct external audits of the proposed IPO companies to ensure that the company discloses true and accurate financial information.In recent years,the failure of IPO audits has continued to occur,which has contributed to the listing of unqualified enterprises,which has damaged the original order of the securities capital market and damaged the economic interests of investors.In this context,it is of practical significance to analyze the causes of IPO audit failures and to propose targeted prevention recommendations.Shinewing Certified Public Accountants,as one of the top eight accounting firms in China,has maintained a high-quality auditing level and never appeared on the Securities Regulatory Commission's penalty list in the past five years.However,on December 6th,2017,the company was punished by the Securities Regulatory Commission for failing to perform due diligence in the process of IPO audit of Huaiji Dengyun Auto-Parts Company Limitied.This paper combs the domestic and foreign scholars' literature on audit failure and IPO audit failure from three aspects: definition,reasons and prevention advice.Then use the information asymmetry theory and rational economic-man theory to research on the IPO audit failure of Shinewing Certified Public Accountants to Huaiji Dengyun Auto-Parts Company Limited.Through analysis,it is found that causes for this failure mainly has the following reasons: firstly,the accounting firm failed to correctly assess the audit risk during the business acceptance and maintenance phase,and the firm has also failed to implement quality control in the audit process.Secondly,the CPA failed to maintain the professional cautiousness to the audited unit's fraud in the course of the audit,and did not follow the CPA's auditing standards to conduct the necessary audit procedures.Then,the deliberate fraud of the management of the enterprise increases the difficulty of auditing the CPA and increases the risk of audit failure.Finally,insufficient guidance and training for the CPA profession and the lighter punishment is also an important reason for the failure of the audit.Based on the above-mentioned causes of audit failure,the following suggestions should be taken to prevent audit failure.The accounting firm should carefully select the IPO audit project and strictly implement the IPO quality control review system;the CPA should maintain the professional suspicion in the audit process and strictly implement the audit procedures;the audited entity should strengthen the company's internal audit and optimize corporate governance supervision mechanism;the Chinese institute of CPA shall establish a quality-oriented industry ranking standard and improve the CPA industry training plan.Besides,they shall increase penalties for the subject and object of IPO audit failure cases.I hope that the analysis and suggestions in this paper can provide a reference for preventing IPO audit failures,and contribute to improving the audit quality of the securities market and maintaining the economic order of the securities market.