Study Of Audit Method Related Management Fraud Reveals Which Based On Risk Oriented

In recent years, a series of significant fraud cases occurred in some domestic andabroad listed companies, such as the United States’ Enron, WorldCom, China’sYinguangxia, Hail Health Branch etc. Also, one of top5international accounting firm,“Arthur Andersen” and China’s "ZHONGLEI" CPA also closed down due to fraud auditfailure. The common feature of above events is management fraud, compared to employeesfraud, accounting errors, management fraud generally override of internal controls, thiskind of fraud is much covert, belong to systemic fraud, and the consequence is much moreserious; also, for auditors’ audit strategy defects and their own experience lacking, themanagement fraud wasn’t effectively revealed, and thus lead to public and investorsmistrust the CPA. Just for above reasons, the audit industry think that the traditional auditmodel is unable to meet current audit requirements for its own characteristics and defects,and need to establish a new audit model, which can effectively reveal management fraud. Inthis background, the modern risk-oriented audit produced in foreign large accounting firms’practicing. Modern risk-oriented audit was firstly proposed and applied by KPMGaccounting firm, other accounting firms like PwC, Deloitte, Ernst&Young also developedtheir own style audit methods based on theoretical framework of modern risk-oriented audit,the application is much more mature. With globalization, the auditing standards of China isbeing aligned with international, and released the new auditing standards in2006, modernrisk-oriented audit concept was fully introduced in the new auditing standards, the newstandards were implemented in enterprise reports audit, but in China, the study based oncurrent law environment and enterprise characters, and how to use modern risk-orientedaudit to reveal management fraud is much fewer. This article is based on a variety oftheoretical and practical studies, in accordance with modern risk-oriented audit conceptguidance to CPA, and explore how to effectively reveal significant enterprise managementfraud.This paper consists of six chapters. The first chapter introduced study background,domestic and international studies, study significance, study content and methods; thesecond chapter introducedmanagement fraud, analyzed the producing reasons, analyzedmanagement fraud means; the third chapter defined the evolution of audit model, and analyzed the advantage of modern risk-oriented audit by comparing with system-basedaudit and traditional risk-based audit defect; the fourth chapter introduced the strategy onrisk-oriented audit model revealing management fraud; the fifth chapter used Hail HealthBranch case to introduce how to audit management fraud under risk-oriented audit model;the sixth chapter is the summary for the study.