Risk-based Audit Quality Control

The accounting profession definitionally provides professional services to a broad array of stakeholders and as a consequence has accountability for the quality of such services. That accountability lies in the risks for low quality. But in China's strides in creating market economy in a society that was once governed entirely by nonmarket forces, the question is there are few incentives for high quality audit. On the contrary, for a certain of institutional flaws, those CPA firms which insist on high audit quality is losing their market proportions. Then, a business mind of "market important,quality slight" becomes prevalent in accounting firms. Such thought has greatly weakened the CPA firms' ability to burden risk, as well led to lack of core competence. The profession crisis taken place in 2001 demonstrates such weakness. Crisis shows the expectation gap between public and accounting profession become sharp, and to handle the crisis, reconsider of some basic audit issues must be taken. The author's opinion is that Auditing is a special control system of reducing the information risk to a socially acceptable level, and only high quality auditing can execute this intrinsic function. From the accounting firm's point of view, to get a stable and continual high quality, one must take particular activity to control audit quality. This thesis is to construct a risk-oriented audit quality control system based on the theory and methods of risk management. To build such quality control system, we should first answer what auditing is as in the modern social and economic structure from a theoretical viewpoint, and second in practice, should use modern management science achievements to arm audit quality control technique. The thesis consists of four parts. The introduction presents the reason why execute risk-oriented audit quality control, as well the study value of this topic; the second part deals with the basic principles of risk-oriented audit quality control, which is to answer what is risk-oriented audit quality control; the third part further discusses how to execute risk-oriented audit quality control, and the last part is a case study. Introduction consists of three parts. The first and second parts point out the importance and objective of risk-oriented audit quality control in both auditing theory research and auditing practice. As a theoretical viewpoint, auditing is a control system of reducing the information risk to a socially acceptable level, however, the deviation from high quality will make this intrinsic function in vain, and thus, quality control is essential. As in practice, the problem is that in a long period of time, China's audit market is lack of demand for high quality auditing, which makes the accounting firms take "low-quality" strategy in competition. Such auditing conceals the risk instead of controlling it,which makes the main difference. In 2001, the hidden risk exposed,then,the accounting profession deeply understands that quality is life, and risk-oriented audit quality control is the guarantee of living and driver of developing. The third part is an overview of essays on audit quality study.Chapter 1 first defines some basic issues such as audit risk, audit quality and risk-oriented audit quality control, and then deal with the principles and standardization of risk-oriented audit quality control. The author holds that audit risk is the possibility of loss derived from auditing. The losses conclude tangible loss,untangible loss and fees paid for risk manage, which is undertaken by both the society and CPA. Audit quality is the characters that make audit control the information risk below a society acceptable level, and the General Accepted Auditing Standards (GAAS) sets the quality standards. Audit quality control is activities an accounting firm used to make sure that it meets its professionalresponsibilities to clients,that is high quality. We call the audit quality control system risk-oriented for two reasons, one is the object is to minimize audit...