A Case Study Of Ruihua Certified Public Accountants' Failure In The Audit Of Huaze Cobalt And Nickel

In recent years,as China’s economy forward develops steadily with high quality and high speed,the capital market in China has become more active,more and more companies choose to go public for financing,and many kinds of problems of financial fraud appears.In the audit supervision work meeting of corporate annual reports,which was held on January 7,2020,the Ministry of Finance pointed that the audit of Certified Public Accountant,as a significant institutional arrangement of market supervision system,plays an important role in many aspects,such as detecting and preventing financial fraud,improving the quality of accounting information and economic operation efficiency and maintaining the order of the capital market and public social interest.However,in recent years,the number of cases that Certified Public Accountant failed in the audit is growing rapidly,which occur now and then,such as the Yataishiye case in 2017,the Huazegunie case in 201 8 and the Kangmeiyaoye case in 2019.These audit failures seriously threaten the stability of the capital market.Therefore,the study of audit failure is imperative.In this paper,the case that Ruihua Accounting Firm,who frequently failed in auditing as its scale was constantly expanding in recent years,failed to audit Huazegunie Materials Co.,Ltd is selected as the research object,which is deeply researched with the research method of combining literature research and case analysis.It has certain value and significance to explore preventive measures by analyzing the reasons of audit failure.There are seven parts in this paper.Part one is the introduction,which has introduced the existing research of domestic and foreign scholars on the definition,reasons and preventive measures of audit failure.In the second part,the related conceptions and theories of audit failure are stated and analyzed.In the third part,the beginning and end of the failure case are reviewed.In the fourth part,the performance of audit failure of Ruihua Accounting Firm is combed from two aspects:failing to fully identify the risk of material misstatement and failing to effectively reduce the detection risk.In the fifth part,the specific causes of audit failure are analyzed from the perspective of accounting firms,certified public accountants,audited company and regulators.In the sixth part,the preventive measures from various aspects are put forward according to the causes of the audit failure.In the seventh part,the conclusion of this paper is elaborated and the future research is prospected.In this paper,an innovative scheme on the aspect of accounting firms to prevent the audit failure is proposed.It is based on the classic case that Ruihua Accounting Firm,who ignored the control of audit quality of its so many branch firms as its scale was constantly expanding in recent years,eventually failed to audit Huazegunie.In this paper,from the perspective of general firm and branch firm of accounting firms,it is suggested that general firm should optimize quality controlling system of the whole accounting firm and strengthen the control of audit quality of branch firm in a specific scheme,which is of reference value and revelation for the industry of accounting firm.