Consideration Of Fraud In The Audit Of Financial Statements

The capital market in China has made great progress, with the economy developing rapidly and the capital pouring into the market continually since 1990s. There are, however, crises that can't be ignored while the capital market is prosperous, especially the credit crisis caused by fraudulent affairs. A series of fraud cases in the stock market, such as the cases of "qiongmingyuan", "hongguang", "yingguangxia" and "kelong", not only do harm to the economic interests of the share-holders and creditors, but also make the immature capital market in a disadvantageous situation since the false accounting information leads to the escalation of speculative behaviors and abnormal fluctuation in the market, moreover, makes influence on the smooth development of the stock market.As is well known, independent audit is the foundation of the development of the stock market, as well as a system that guarantees the quality of account information provided by listed companies. Confronted with the prevalence of fraud in the capital market, CPAs, as economic police, can't deal with it successfully, inversely, are haunted by it. The audit for fraud has caused a serious care in both theoretic and professional circle of audit, and it becomes a worldwide-complicated problem. It is also an urgent and important problem in China. The thesis states that it's CPA's responsibility to detect fraud in the financial statement audit. On the basis of it, the following parts focus on the reasons and the methods of the major type of fraud—financial statements fraud and the way to detect it. By learning from foreign latest researching fruits and in light of the Chinese present situation, the thesis does applied research about CPAs how to consider fraud in the financial statement audit, in order to be useful to the governance of financial statement fraud.The paper is divided into 5 parts.The first part: foreword. It briefly introduces researching background and motive, present researching situation and representatives, researching methods, principal framework and innovative views of the thesis.The second part: CPAs' audit responsibility for fraud. It begins with the definition and the classification of fraud. Then the author briefly reviews the history of fraud-auditing responsibility in the world, drawing a conclusion that CPAs should shoulder the responsibility of discovering fraud in the financial statement audit. After that, the author distinguishes the consideration of fraud in the financial audit from the examination of fraud.The third part: Reasons and methods of public companies' financial statements fraud in China. It focuses on the most important type of fraud—financial statements fraud and analyses the reasons of public companies' financial statements fraud in our country by introducing the Fraud Triangle Theory. Then it elaborates on the present situation and methods of the financial statements fraud.The fourth part: Countermeasures of CPAs considering the fraud in the financial statements audit. This part deals with the overall idea, the specific strategies and some important auditing procedures about the consideration of the fraud in the financial statements audit.The fifth part: Analysis of a case of financial statements fraud. It analyzes the case concerning Kelong Company, and also designs the strategy to consider the fraud in the financial statements audit.