Audit Risk Analysis Of The Insured Enterprises Of Directors’ Enterprises Of Directors’ Executive Liability Insurance

The law enforcement and supervision departments in China are increasingly strict in regulating illegal activities of listed companies.With the continuous improvement of our class action system,the listed companies usher in the era of heavy responsibility.The implementation of the new securities law is to increase the punishment of listed enterprises for violations of laws and regulations,strictly crack down on securities violations.This also makes the directors’ liability insurance suddenly become hot from nobody,many listed companies have purchased directors’ and executives’ liability insurance(directors’ liability insurance)for the company’s directors,supervisors and senior managers.Dong liability insurance originated from the western market economy,and the penetration rate of listed companies in western developed countries reached more than 95%.However,Dong Jie insurance was introduced into China for a short time,and the proportion of Chinese listed companies is very low.Finally,as an emerging external governance mechanism,the governance effect of D&O is still controversial in the academic circle.This paper selects Hengyi Petrochemical,which has continuously insured D&O since2018,as the case study object to analyze the impact of D&O on the annual report Audit risk of listed enterprises in China.First of all,through reading a large number of relevant literature,I sorted out the relevant research of D&O,Audit risk,and the academic research of their intersection.Secondly,a simple analysis of the current situation of D&O insurance and the problems exposed in the development of D&O insurance in China was made.Combined with the two dimensions of insured D&O and uninsured D&O of listed companies,the statistics and comparison of D&O,corporate violations and Audit risk are made,and the transmission path of the impact of D&O on Audit risk is also combed.Then,the case analysis section combines theories such as information asymmetry,modern risk-oriented auditing,reputation mechanisms,and corporate governance to analyze the motivation for Hengyi Petrochemical to purchase D&O and the audit situation after purchase.Next,further combining the modern audit risk oriented theory,the impact of Hengyi Petrochemical’s D&O insurance on different levels of Audit risk is analyzed from three aspects: major misstatement risk analysis,Audit risk analysis at the identification level,and inspection risk.Finally,based on the above analysis,draw analytical conclusions and provide relevant suggestions in the case inspiration section.The study found that Hengyi Petrochemical’s D&O insurance has both advantages and disadvantages on the impact of annual report Audit risk,mainly in two aspects:On the one hand,the supervisory effect of D&O has promoted the improvement of Hengyi Petrochemical’s internal governance mechanism,promoted the improvement of internal control and information disclosure levels,and reduced the risk of significant misstatement.On the other hand,the incentive effect of D&O increases the risk-taking of enterprises,leading to a continuous increase in operational and inherent risks faced by the company,and increasing the level of inspection risk at the recognition level.In view of the above conclusions,countermeasures are proposed for different levels of Audit risk: first,countermeasures for major misstatement risk.The first is the response measures for major misstatement risks.Firstly,the audit unit needs to analyze the motivation of listed companies to purchase D&O insurance.The audit unit should not only understand the background of the insurance,but also evaluate whether the company has fraudulent motives due to purchasing director’s liability insurance;Secondly,it is necessary to analyze whether the insured enterprise has internal control deficiencies;Finally,it is necessary to analyze whether the insured enterprise has financial fraud risks and take corresponding measures.The second is the Audit risk response measures at the identification level.The audit unit should strengthen cooperation with insurance institutions,strengthen audit quality supervision,and the audit unit and auditors should attach importance to the learning and application of new knowledge.