Case Study On Audit Failure Of Yabaite By Zhonghua Accounting Firm

With the continuous development of social economy and the increasingly mature capital market,the certified public accountant industry is booming.The audit report issued by certified public accountants plays an increasingly important role,which is not only conducive to the evaluation of managers' fiduciary responsibility,but also conducive to investors and creditors to make relevant decisions.However,behind the development of the industry,audit failures occur frequently.In recent years,the exposure of audit failure cases of listed companies represented by Greenland,Wanfushengke,Jiuhao group and Yabaite has seriously damaged the reputation of accounting firms and certified public accountants,which has increased the public's distrust of the audit industry.Therefore,in order to promote the healthy development of the audit industry,it is of great significance to study the typical cases of audit failure and explore the causes and countermeasures of audit failure.This paper studies the audit failure of Yabaite of Zhonghua accounting firm.First of all,the risk-oriented auditing theory,rational economic man hypothesis,fraud triangle theory and information asymmetry theory are expounded and analyzed to lay a theoretical foundation for the case study.Then,it introduces the basic situation of Yabaite,review the audit failure case of Yabaite and the punishment result of China securities regulatory commission on Yabaite.At last,the reasons for the audit failure of Zhonghua institute were deeply explored and countermeasures were put forward.In this paper,the reasons for the audit failure of Zhonghua institute on Yabaite are summarized into three aspects:Yabaite,Zhonghua accounting firm and certified public accountants,and the external regulatory environment.Specifically,the financial fraud of Yabaite leads to a high risk of material misstatement in its own financial statements,which induces the audit failure of Zhonghua accounting firm.Zhonghua accounting firm and its certified public accountants lack due practice caution and professional suspicion in the audit process,fail to follow the audit standards,and issue improper audit opinions,which is the fundamental cause of the audit failure.The external reasons for the audit failure are theimperfect legal system,the lagging supervision of the industry and the insufficient punishment.Finally,the author puts forward some countermeasures to prevent audit failure: if the auditee makes performance commitment in the process of listing,it should make rational commitment according to the future development status of the enterprise,meanwhile,it should strengthen the construction of internal control environment,and reasonably optimize the ownership structure and governance structure.In the process of auditing,certified public accountants should strengthen the risk assessment procedures,design and implement appropriate audit response strategies around material misstatement risks,and always maintain professional caution and professional skepticism.Accounting firms should strengthen audit quality control and implement strict quality control system.In terms of external regulatory environment,relevant laws and regulations should be improved,industry supervision and punishment should be strengthened.This paper hopes to summarize the reasons for the failure and improve the quality of the audit service by studying the case of Zhonghua institute's audit failure of Yabaite.