Research On Audit Failure From The Perspective Of Human Nature

With the continuous development of China’s social economy and the gradual improvement of the financial market,the CPA practice is flourishing and the reports provided by auditors have a growing impact on the users of information,not only in assessing the fiduciary responsibility of the relevant managers,but also in assisting investors and creditors to make informed decisions.Accounting firms can,in principle,go some way toward preventing corporate financial fraud,safeguarding the market economy,and encouraging companies to provide truthful and valid financial information to users of information.However,cases of audit failures are common in practice,and in recent years,there has been a spate of audit failures of listed companies such as Wanfu Biotechnology,which has seriously damaged the reputation of accountants and accounting firms.In some cases,the management of a mismanaged company wants to give the outward impression that the company is well run and that management is cooperating in committing fraud,and it is difficult for the accounting firm performing the audit to detect problems in the traditional audit process.Currently,accountants need to find better ways to use audit psychology to better reduce the likelihood of audit errors.In the case of fraud,audit errors are largely related to the management of the company,but the audit firm involved in the audit also bears unquestionable responsibility,which leads to doubts about the firm’s credibility.Therefore,this paper selects two representative audit failure cases in recent years,namely,Kangmei Pharmaceutical and Kanghua Agriculture,for review,analyzes the causes of audit failure from the perspective of human nature,and proposes corresponding response strategies,hoping to provide help in reducing the probability of audit failure with a new perspective in order to promote the positive development of the audit industry.This paper analyzes the audit failure problem mainly based on theories such as cognitive bias and other research methods such as literature study and case study.First,the classic cases of audit failures of Kangmei Pharmaceutical and Kanghua Agriculture are broadly reviewed,and the audit process of accounting firms is analyzed,and the administrative penalties of the SEC in this case are also broadly reviewed.Secondly,we analyze the causes of audit failures from the perspective of human nature and from the perspective of the audit subject and the audit object: for the audit subject,we propose that cognitive bias causes the auditor to be careless,the auditor to act according to "profit",the auditor to have a negative mentality towards the work,and the auditees to have a transfer of benefits.For the audit subject,the problems of fraud increase audit risk,stereotype of audit work,and informal group psychology affect the implementation of auditors’ strategies are raised.Finally,preventive measures are proposed from the audit subject,audit object,and external environment: the audit subject should strengthen the quality control construction of accounting firms,improve the staff incentive system,maintain the professional competence of auditors,and improve communication skills;the audit object should create an honest corporate culture and improve the internal control system of enterprises;for the external environment,the audit market should be regulated and supervision should be increased.For the external environment,we should regulate the audit market and increase the supervision,aiming to reduce the probability of audit failure of accounting firms.Based on the relatively new perspective of human nature,this paper studies audit failure,hoping to provide cases and literature supplements for reducing the probability of industry audit failure and improving audit quality,and hoping to provide some reference value for the improvement of audit practice in the future.