A Case Study On The Failure Of YABAITE Audit Based On Conflict Theory

As an important monitoring activity in the social and economic structure,the fairness of auditing has always been the focus of public attention.In recent years,due to a combination of factors,there have been many cases of audit failures in China,which have seriously challenged the credibility of the auditing profession,and the public’s trust in the audit practice is decreasing.In the long run,the meaning of the existence of the auditing profession will also be questioned.Against this background,it is of profound practical significance to explore the factors affecting independent audit failures and to summarise measures to avoid audit failures.This paper first summarises existing research from the perspective of audit failure and the relationship between multiple parties;then introduces the theoretical basis used in this paper around the basic overview of audit failure,focusing on expanding the analytical framework of the audit conflict model;after determining the research basis,the case of audit failure of Jiangsu YABAITE by Zhong Hua Accounting Firm is chosen as the object of analysis,so as to take a brief review of the case background and process.Then,the game analysis is conducted from different audit stages to highlight the power gap between the two sides in the audit process and reflect the conflict relationship;after that,the specific causes are analysed in conjunction with the audit conflict model,from the perspectives of "driving" the management to exert pressure and "restraining" the auditor from conducting a normal audit."Finally,a relatively feasible audit failure avoidance analysis is conducted from the perspectives of "restraining" management fraud and "driving" the firm’s normal audit.Finally,a relatively feasible audit failure avoidance analysis is conducted in terms of both ’restraining’ management fraud and ’driving’ the firm’s normal audit.Unlike previous case studies of audit failure,this paper focuses on the power game and equilibrium between the audit firms.The study found that YABAITE exerted pressure on Zhong Hua accounting firm driven by four factors,including the determination of audit fees and pressure to perform due to high performance commitments,while Zhong Hua ’s ability to resist YABAITE ’s pressure was weakened by factors such as the mismatch between audit costs and benefits,and the failure of risk assessment and risk response.From the analysis of the game of power between the two parties at different stages,it can be seen that Zhong Hua was always at a disadvantage position,and the constraints played a major role,which eventually led to the auditor’s behavioural deviation and the formation of an inappropriate audit opinion.For the above reasons,I have made suggestions for avoidance from the perspectives of "restraining management from committing fraud" and "driving the auditor to conduct a normal audit".It is hoped that through the joint efforts of multiple parties,the balance of power between the two sides of the audit can be achieved to reduce the occurrence of conflicts,reduce the possibility of auditors issuing inappropriate opinions and maintain the normal order of the audit profession.