Analysis On The Audit Failure Case Of Kangde Xin

With the continuous disclosure of financial fraud cases in China’s capital markets,such as Yinguang Xia,Jinya Tui,Xintai Tui,etc.,the regulatory authorities and the public can’t trust without reservation the audited accounting information of listed companies,and question the professional ethics and professional quality of the CPA industry,which have seriously affected the healthy survival and long-term development of the CPA industry.To study the causes of the audit failure and the corresponding measures can solve these problems as soon as possible.The thesis adopts literature research method and case study method.First of all,the thesis screened and sorted out the previous research done by domestic and foreign scholars to form the basis of the thesis,and at the same time sorted out the causes of audit failure,summarized the measures to prevent audit failure.Secondly,the thesis put forward six theoretical foundations and summarized the causes and consequences of audit failure,such as the theory of principal-agent,the theory of audit conflict and other basic theories.Again,the thesis took Ruihua’s failure to audit Kangde Xin as an example,briefly introduced the basic situation of Ruihua and Kangde Xin,and introduced in detail Kangde Xin inflated revenue,costs and expenses to create a good performance,illegally used fund-raising,etc.,briefly detailed Ruihua implemented the risk assessment procedures according to the requirements of audit standards,implemented the letter of evidence procedures,checked important customers and supplies,implemented inventory monitoring procedures,implemented procedures for special matters.Through the analysis of the case,the thesis found the reasons and consequences for the audit failure of Kangde Xin.From the perspective of CPA and Ruihua,the lack of independence was the most important reason.From the perspective of Kangde Xin,the lack of integrity in management was the direct cause of audit failure.From the perspective of audit environment,the low cost of illegality was the objective reason for audit failure.Finally,the thesis summarized the enlightenment of failure cases of Ruihua auditing Kangde Xin,providing some suggestions for CPA and the auditees to prevent audit failure,providing some advices from the perspective of social environment.