Study On The Effectiveness Of Auditing Reputation Mechanism

The reputation mechanism is a non-mandatory and guided system.Its most crucial role is to effectively transmit various types of information in the market and reduce transaction costs.The research on the audit reputation mechanism by domestic and foreign scholars has only stayed at the point of view of mechanism failure.Most of the time,the Ministry of Finance regularly announces the information of its sampled firm's practice information,and the China Securities Regulatory Commission's information on penalties for the offending firm and the auditor.The annual review of the accounting firm's comprehensive evaluation information disclosed by the Chinese Institute of Certified Public Accountants was conducted to obtain auditors' failure to audit the reputation mechanism.However,under the background of the increasingly perfect delisting system and the gradual strengthening of capital market management,the audit reputation mechanism has actually played its role.However,the society has given more attention to audit failure cases and financial statement fraud cases,and to successful auditing.There is no direct evidence in the case to prove that the reputation mechanism has played a role.Therefore,it is more difficult to positively study the effectiveness of the audit reputation mechanism.However,the Xindu Hotel audit case showed that the accounting firm's reputation mechanism had failed before the entire process was effective.Eventually,the accounting firm chose to disclose the facts in order to maintain its reputation.Therefore,this case provides practical experience for the study of the effectiveness of the auditing mechanism.This paper uses the case analysis method and audit risk model analysis method to take Xindu Hotel Audit as an example to study the effectiveness of the audit reputation mechanism.In Xindu Hotel's audit cases,through audit risk assessment based on the risk of material misstatement,it can be found that Xindu Hotel has the use of golf course rentals to manipulate 2015 profits.Under this circumstance,Tianjian and Daxin Certified Public Accountants issued the 2015 audit conclusion to meet the re-listing clearly lacking the prudence principle that should be maintained in the audit procedure.The audit reputation mechanism is not working at this time.After assessing the risk of material misstatement,the two auditors chose to protect the reputation of the accounting firm when the audit fees were established.At this time,the audit reputation mechanism worked,and the disclosure of the golf course's rent was found to be misidentified.Xindu Hotel had a negative profit after deducting non-recurring gains and losses,resulting in delisting.The hotel itself has a relatively large audit risk,and the delisting and non-disclosure are all auditor's validation results.However,the two audit reports released by the auditor within one year are exactly the opposite.The audit report precisely shows that the audit reputation mechanism is internal to the firm.From the failure to the effective transformation process,the firm successfully defended the reputation bottom line,the total number of customers and total income did not change as a result.Instead,the market share of the three firms all wished grandma to rise.Which shows that the audit reputation mechanism is actually effective.The research objective of this paper is to promote the establishment of the audit reputation mechanism and the function of the audit reputation mechanism.Through the research of Xindu Hotel's audit cases,this article finds that the audit reputation mechanism within the larger accounting firms in China is relatively mature.The role in executing the audit process is effective,it can better constrain the behavior of auditors,improve the audit quality,and reduce the financial statements.Occurrence of fraud cases and audit failures.Therefore,it is particularly important to speed up the establishment of an audit reputation mechanism.At the end of the article,this article also puts forward relevant suggestions and measures in order to improve the audit reputation mechanism as soon as possible,enhance the auditor's professional ethics,create a high-quality audit environment,and purify the capital market.The innovation of this paper is that most of the previous researches on the audit reputation mechanism prove the function of the audit reputation mechanism from the negative side,and choose Xindu Hotel Audit as the background of the case.One listed company and three accounting firms have three different types of auditing.The behavioral performance can more intuitively observe the whole process from the failure to the effectiveness of the audit reputation mechanism,and express the validity of the audit reputation mechanism from the front.