Case Study On Merger And Acquisition Audit Failure Of Zhongtianyun Accounting Firm

The market economy is developing rapidly,and the capital market environment is changing rapidly.In order to adapt to the pace of economic development and keep the company in an advantageous position,corporate mergers and acquisitions have gradually become a way for companies to scale up,complement each others’ advantages,and seek common development.This has created a huge demand for Merger & Acquisition audit(M &A audit).However,there is a large gap between the theoretical development and practical needs of M & A audit.CPAs lack business guidance and restrictions on codes of conduct in M& A audit,coupled with the high risks and complex auditing relationships,CPAs issue improper audit opinions,which leads to the possibility of audit failure greatly increased.Therefore,it is necessary to analyse the reasons for the failure of M & A audit in combination with actual cases and explore the work focus,which will help prevent similar audit failures.Based on the modern risk-oriented audit theory,information asymmetry theory and game theory,this paper uses case analysis method and literature research method to study the M &A audit failure of Zhongtianyun Accounting Firms(referred to as Zhongtianyun).First,sort out the research results related to M & A audit and audit failure.Then review the merger case,sort out the inappropriateness and analyse the reasons for the audit of Guangdong Guangzhou Daily Media Co.,Ltd.(referred to as Guangdong Media)in the acquisition of Shanghai Xiangxieli Media Co.,Ltd.(referred to as Xiangxieli).The study finds that Zhongtianyun and its CPAs don’t pay enough attention to the preliminary overall investigation work.In the risk assessment stage,the fraud risk of Xiangxieli isn’t fully assessed and the control test performed for its internal control situation is formal.The substantive procedures to be implemented in response to risks aren’t targeted and formal.Auditors need to improve their risk awareness and competence.At the same time,there are gaps in the M & A audit system,the external supervision lags behind and the intensity is low.These reasons indirectly accelerate the failure of M & A audit.Finally,for the above reasons,this paper puts forward suggestions to avoid M & A audit failures.Accounting firms and CPAs should pay attention tothe preliminary overall investigation,focus on projects that may be fraudulent on the basis of industry and enterprise characteristics,insight into the design and implementation of the internal control of the audited unit,and design targeted audit procedures to deal with identified misstatement risks.CPAs should always adhere to the questioning thinking,constantly strengthen their professional knowledge level,and improve their competence.In terms of external supervision,relevant departments should improve the rules and regulations regarding M & A audit as soon as possible,and improve the intensity and quality of supervision and punishment.