Case Study On Financial Fraud And Audit Failure Of ErKang Pharmaceutical

The development of the GEM is very quick since its establishment in 2009.The GEM has effectively promoted the development of strategic emerging industries.But gem takes a fancy to the growth and potential of enterprises,which also brings high risks.The emergence of more frequent financial fraud in gem has seriously violated the requirements of reliability and relevance in the quality of accounting information.Gem market also has the characteristics of risk amplification,once the problem is very destructive.In this paper,the GEM as the background,focusing on the analysis of GEM listed companies financial fraud means and motivation and audit failure of the subjective and objective reasons.The purpose of this case study is to avoid fraud,improve the audit environment and provide reference for the timely identification and prevention of corporate fraud.This paper reviews the literature on financial fraud and audit failure and the relationship between them.Based on the theories on financial fraud and audit failure,this paper summarizes the relationship between them and provides theoretical support for case analysis.Data analysis and case analysis are combined in the analysis method.The author chose the representative enterprise of pharmaceutical industry with large amount of fraud shortly after the GEM listing,erkang pharmaceutical,which was once called "white horse stock" of GEM,as the object of case study.In the analysis of the causes and means of financial fraud of erkang pharmaceutical,the amount of errors before and after correction statements and the comparison between erkang pharmaceutical financial indicators and the average value of the pharmaceutical industry are mainly discussed.When analyzing the reasons of erkang pharmaceutical’s audit failure,this paper takes the narrow sense of audit failure as the perspective and concludes that the subjective factors of certified public accountants’ audit failure include not fulfilling professional prudence,not maintaining independence and not implementing correct audit procedures.In addition,audit failure has its objective reasons.The chaos of external audit environment makes the audit scope expand and the probability of audit failure increase.Due to the wide coverage of GEM audit,the rise of emerging real economy,the frequent overseas affiliated transactions and the growth of listed companies’ overseas subsidiaries,The relationship between audit failure and financial fraud of erkang pharmaceutical co.,LTD.In addition,Erkang Pharmaceutical Audit failures need to be accountable to the relevant CPAs to reveal the audit responsibility of fraud.This paper summarizes the accounting firmspunished by the SFC in the past eight years to analyze the relationship between the fraud means and causes and the audit responsibility of CPAs.The lack of audit responsibility of CPAs also means audit failure.Finally,aiming at the problems of Erkang Pharmaceutical Financial Fraud and Audit Failure,this paper puts forward suggestions for improvement from the perspective of listed companies themselves and CPAs.We hope that through the above suggestions,we can standardize the behavior of listed companies on GEM,improve the audit environment,and enhance investors’ trust in GEM.