Research On M&A Auditing Risk Of Private Target Company

ABSTRACT:Mergers&Acquisitions are the main means of business expansion outside regular size. M&A is a complicated systematic project, prepared from research to design, to negotiate, sign deal to post-merger integration. There is a series of activities in the organic process. M&A risk is in all aspects of the process. In M&A transactions, the information is incomplete between the parties in the transaction. Buyer firms need to hire a professional firm to control trading risk, protect company interests. As one of the important role of CPA professional firm providing auditing services in M&A transactions, reducing the harm by incomplete information distribution.When M&A transactions is prosperity, M&A auditing also has a plenty development. However, the academic study of M&A auditing risk was less. Different from auditing risk theory and general financial statements auditing, M&A auditing risk research rarely does depth and theoretical. This paper in CPAs’ horizon, based on auditing risk theory and M&A theory, used the concept of enterprise value, assessed the M&A decision-making stage of the private target company auditing risk, proposed auditing coping strategies.This paper identifiated the M&A auditing risk in decision-making stage, used the concept of enterprise value, used the key point of enterprise value model to identify the M&A auditing risk of private target company. Further, based on modern risk-oriented auditing risk model:Auditing Risk=Material Misstatement Risk X Detection Risk, combined M&A risk with the M&A auditing risk, corrected Material Misstatement Risk in the model, pointed out the Material Misstatement Risk distribution points which was corrected, and designed auditing process in the M&A decision-making stage. Finally, with the cement industry enterprises as an example, assessed M&A auditing risk of private target company, proposed auditing coping strategies, provided contribution for establishing operational guidelines for M&A auditing.