An Accounting Firm To Build Risk Management Mechanism Based On The ERM Concept

Since thel960's, the number of litigations against Certified Public Accountants (CPA) has substantially increased in the western countries. The Enron scandal in United States led to one of the world's top five accounting firms Arthur Andersen's dissolution. In China, two famous accounting firms which are "Hubei-Lihua" and "Zhong Tian Qing", were no longer exist because of the "ST Red Light", "East Boiler", "Ying GuangXia" scandal. The audit industry has entered a "litigation explosion" era. Therefore, the Certified Public Accountant has gradually become a high-risk profession. Compared with their foreign counterparts, accounting firms in China are special in that the overall risk is very low. The institute of certified public accountants and accounting firms have been under even more adverse market environment, because of the following reasons: firstly, frequent collusion among corporate managers; secondly, the difference between clients' expectation for auditing quality and that guaranteed by industry standards; thirdly, the increased awareness by clients to use legal tools in defending their rights; fourthly, the rapid expansion in size of local accounting firms. So accounting firms risk management are social needs and the development of accounting firms, furthermore, it is the base of the development of certified accounting firms.Based on the features of accounting firms and risk management theory in currently, according to the ERM, this paper attempts to compare the various internal control systems current under development in Chinese accounting firms, and discuss the operation of accounting firms , security of assets, reliability of reports, operational efficiency and effect and the identification and assessment of strategic risk, We propose the Accounting firm risk management mechanism, take the perfect rules and regulations as the foundation, take the risk recognition and the risk deals for the core, take standardization, collectivization, internationalization as goal, and give some advices for building strong a accounting firm which has strong competitiveness and ability to resist risk.