The Study On Audit Failure Of Lixin Accounting Firm In The Case Of Shanghai DZH Limited

the definitioncapital market,the importance of audit quality has become increasingly prominent.With the gradual improvement of audit demand,certified public accountants,as the "economic police" who can verify the authenticity,legitimacy and fairness of financial information of listed companies,have attracted more attention.At the same time,the possibility of audit failure also increases with the scale of listed companies,the increase of business types and financial fraud The means are numerous and increasing.It is increasingly difficult for certified public accountants to prevent audit failure.Audit failure not only brings serious economic losses to investors,but also seriously affects the reputation of accounting firms and certified public accountants,and even causes the public to question the audit industry,which is not conducive to the healthy development of the capital market.This paper combines theoretical research with case analysis,on the basis of domestic and foreign scholars research on audit failure,focusing on the classic case of audit failure of Shanghai great wisdom Co.Ltd,This paper explores the performance,causes and consequences of audit failure,and puts forward targeted preventive measures to prevent audit failure,so as to contribute to the healthy development of CPA audit industry.Firstly,this paper introduces the definition and manifestation of audit failure.Based on the process theory,it is called audit failure that certified public accountants and related units fail to be diligent in complying with generally accepted auditing standards and implementing specific auditing procedures,or subjectively give up their independence and collude with the management to cheat on major matters It is called audit failure that we fail to disclose the financial fraud in the financial statements of listed companies and issue audit reports with false contents.Audit negligence and audit fraud are two forms of audit failure.The main causes of audit failure are the financial fraud of the audited unit,the insufficient ability of certified public accountants,the quality control of accounting firms is not in place,and the audit industry supervision is weak.The theoretical basis of this paper,including information asymmetry theory,principal-agent theory,audit conflict theory and gone theory,explains the causes of audit failure from the theoretical level.Secondly,this paper selects the classic audit failure case of Lixin on big wisdom annual report audit,and introduces the financial fraud of Shanghai great wisdom company from the aspects of false income recognition,cross period cost disbursing,andmerging subsidiary statements in advance With false audit reports,it has a bad impact on the society,and is punished by the CSRC,resulting in damage to its reputation,and should bear joint and several liability for the losses of investors according to the judgment.Thirdly,it analyzes the causes of the problems in the case.From the perspective of Lixin and auditors,it is found that the audit firms and auditors do not maintain the necessary professional prudence and skepticism in the audit process,the implementation of modern risk oriented audit concept is not in place,the audit procedures and working papers are not in place,and the audit firm’s quality control of audit reports does not play much role,and there are still audit failures.The imperfect governance structure of the audited units helps enterprises to engage in malicious financial fraud,which fundamentally leads to the occurrence of audit failure.The current external environment,such as disordered competition in the audit market,the relevant laws and regulations of the CPA industry and the lack of supervision of the industry itself,have created conditions for audit failure.Finally,through the analysis of cases,this paper summarizes the conclusion and obtains the Enlightenment: under the external environment of excessive competition and insufficient supervision in the audit market,malicious financial fraud is the root cause of audit failure,while the lack of professional ability of certified public accountants and the failure of quality control of accounting firms lead to the failure to disclose the financial statements of listed companies However,the audit report with false content will directly lead to audit failure.If certified public accountants and accounting firms fail to fulfill their duties diligently,resulting in audit failure,the accounting firms will bear joint and several liability for investors’ losses.Accounting firms should carry out risk oriented audit concept,strengthen quality control,and relevant management departments should further improve the audit supervision system of listed companies,standardize audit practice,increase the intensity of punishment,and prevent audit failure.