Research On Audit Failure Of Jiuhao Group Reverse Take Over

For a long time,backdoor listing has been preferred by many companies that plan to go public because of its simple process and low temporal cost.The Supply-Side Structural Reform starts a new chapter of China’s economic development,however,with the prosperity of the capital market,the activity of backdoor listing and corporate restructuring are further spurred.In 2017,in the case of the backdoor listing,Jiuhao group was penalized by the China Securities Regulatory Commission for its attempt to reinstate the inflated “good assets” into the Anzhong Inc.by improper use of inflated income and fictitious bank deposits.As Jiuhao group’s auditor,Reanda Certified Public Accountants(Reanda)suffered more serious damages in terms of reputation and credibility.This incident has aroused a widespread concern in the field of CPA.Jiuhao group’s financial fraud involves diversified subjects,new fields,typical approaches,and subtle manipulation,which raises the alarm bell on the matter of professionalism,accuracy and comprehensiveness for the listing audit.Taking Jiuhao group and Reanda as an example,this article will study the methods employed by Jiuhao group in the fraud process and reveal the downsides of audit and regulation.Based on case analysis,this article will apply risk-oriented theory and information asymmetry theory to study the reasons for Jiuhao group’s audit failure.In addition,the important factors that caused audit failure are also classified and summarized,from the chosen process of backdoor listing and establishment of departmental institutions,to financial manipulation and fraud,from the staffing of audit firms to the mutual selection between cost and high-quality audit.And finally,the specificity of the macro-external regulatory system and penalties towards backdoor listing audit will be discussed.Therefore,important measures to avoid risks are concluded into the following points: the accounting firm should first maintain professional skepticism and prudence in undertaking the backdoor listing project,design and implement targeted audit procedures,strictly implement risk audit procedures,implement details,and improve the audit quality control system.External supervision is also very important.It is necessary to improve the regulations related to the legal liability of certified public accountants and increase the supervision and punishment of the auditing industry.In order to improve the integrity and effectiveness of the audit work of listed companies and capital markets in China,we hope to promote prevention.The measure of listing risk by backdoor listing has reached universality.