Case Analysis Of GP CPAs’ Failure To Audit Kangmei Pharmaceutical Co.,Ltd

Since the establishment of the two stock exchanges in the early 1990 s,China’s capital market has formed a multi-level market structure after more than 30 years of steady development.Under the background of the comprehensive implementation of registration system,it can be predicted that the number of listed companies will continue to increase in the future.Meanwhile,the quality of financial information of listed companies is particularly important for the regulatory authorities,the majority of investors,and intermediary agencies.Certified public accountants act as the provider of assurance services and the economic police of corporate financial information,whose work has gained high attention from all walks of life.In particular,audit reports issued by them play a key role in the investment decisions of small and medium investors to a considerable extent.As a result,the public has high expectations for auditors.In recent years,in order to purify the market ecology,the CSRC maintains a "zero tolerance" attitude towards financial fraud and other vicious violation of laws and regulations,strictly deals with relevant listed companies,intermediary agencies and responsible persons,and especially emphasizes the role of certified public accountants as the gatekeeper of the capital market.Certified public accountants should pay more attention to the latest regulatory trends,deeply study the problems and causes of relevant audit failure cases,summarize and improve,in order to reduce the possibility of audit failure,provide high-quality assurance services for the majority of financial information users,and be good gatekeepers of the capital market.Therefore,this dissertation has considerable practical significance.It helps auditors consider the main influencing factors of audit failure in a more comprehensive way,deeply understand the main problems existing in audit,provide improvement suggestions for relevant subjects with similar problems,and effectively reduce the possibility of audit failure.Starting with the theoretical research of audit failure,this dissertation expounds the research background and significance of audit failure,and combs the current research at home and abroad,analyzing from two definitions of audit failure-result failure theory and process failure theory,and the four main causes of audit failure-fraud of the audited unit,failure of certified public accountants to practice as required,superficiality and ineffectiveness of accounting firms’ quality control and weakness of regulatory penalties,to impacts of audit failure on all parties and theoretical explanations of audit failure.Based on the theoretical study of audit failure by scholars at home and abroad,this dissertation analyzes the audit failure of Kangmei Pharmaceutical Company in GP CPAs,and points out the causes of audit failure from four aspects: First,auditors lack professional competence and professional ethics,fail to perform audit procedures with diligence and responsibility,and lack professional suspicion and independence for abnormal financial data;Second,GP CPAs is the audit firm of Kangmei Pharmaceutical Company’s annual report for many consecutive years,whose audit fee has been rising year by year,and the quality control system is not strict in the control of audit quality,which has not produced the due effect,leading to the gradual destruction of independence and the risk of collusion;Third,Kangmei pharmaceutical’s own internal control system is imperfect,and the equity is highly concentrated.The company’s internal governance and external interests of controlling shareholders blend,while the enterprise’s own financial fraud exists and information disclosure is not standard;Fourth,the supervision of the audit industry is not in place,forming multi head supervision,but there is no effective cooperation.At the same time,regulatory penalties are light.In view of the above research and analysis,the following enlightenment is drawn: First,improve the professional level and independence of auditors,and implement audit procedures with due diligence;Second,standardize and improve the audit quality control system of accounting firms;Third,establish and improve the internal control of listed companies to prevent financial fraud;Fourth,strengthen the punishment of relevant responsible subjects;Fifth,consider innovating the existing audit model to prevent the lack of independence of auditors at the institutional level.