Occupational Doubt, Analysis Procedures And Audit Failures

In the process of maintaining the healthy development of the capital market, the role of the CPA has been highlighted, and is getting more and more social status, which also is known as the "economic police".With the rapid development of Chinese market economy, under in of highly competitive, the chances, pressure and excuses for listed companies increased, so financial fraud cases occurred frequently by using more subtle and complicated means of fraud. CPA, as the "economic police", did not do their duty in these cases, even some CPA was involved in fraud with audited entity and causing the final audit failure. These audit failure cases not only caused huge economic losses to the investors, but also caused a huge negative impact to the reputation of the CPA industry; even more, these cases caused a bad effect to healthy development of China’s emerging capital markets.In this paper, author regards Dahua new earth IPO audit failure as the research object. By using cases analysis method and literatures study method, author found that CPA lack of professional skepticism and audit analysis procedures are not following the standard are main reasons of audit failure. By deeper analysis of the case, author summarized the specific factors of generating frauds and how to recognize frauds. Author also analyzed the reason of CPA audited failures. As the result, in the whole process, CPA lack of professional skepticism, especially in using of analytical procedures of each stage of audit process, caused the audit failure. Finally from CPA itself and regulators (Ministry of Finance, the CICPA), author claims that the CPA should strengthen the auditing professional skepticism and the understanding and application of analytical procedures to help CPA to improve the fraud detection rate, enhance the ability of CPA to expose fraud, standardize stock market and economics rules.