A Study Of Steel Companies In China

The financial risks of steel enterprises seriously affect the healthy development of the national economy.Under the supply-side structural reform,the steel industry with overcapacity,overstock,and high debt is facing pressure to survive.The act of disguising financial statements with improper means often occurs.The inherent industry specificity leads to higher audit risk for steel companies.How to strengthen the auditing supervision of financial frauds,and how to identify and prevent audit risks are particularly important.In 2016,the CICPA interviewed some accounting firms under the theme of "Preventing Audit Risk in Annual Reports of Steel Listed Companies",requesting auditors to maintain due professional skepticism,prudently assess and appropriately respond to the risk of possible material misstatement in audit report.However,the results have not been satisfactory,and fraud in steel companies continues to occur frequently.At present,there is a lot of literature to analyze the audit risk of listed companies,but the theory and practical research combined with specific steel enterprise audit is not mature.Therefore,based on modern risk-oriented audit theory,fraud motivation theory and audit risk model,this paper analyzes the audit risks of steel enterprises.First,starting with the recent financial fraud case of Fushun Special Steel,this paper analyses the means and motivations for its financial fraud.Second,from the position of contracted firms and auditors,study the specific risk points from the major misstatement risk of financial statements,major misstatement risk of assertion and the inspection risk.Finally,this paper points out the precautions that the auditor should take in the process of auditing the steel enterprise.This paper draws the following conclusions: First,Steel enterprises have an unreasonable capital structure,inventory backlogs that are difficult to identify,and margin for profit reconciliation for impairment provisions that need to be focused on in the audit.Second,In the case analysis,Fushun Special Steel's financial frauds mainly consisted of four aspects: false increase of assets,false record of asset impairment,false record of main business costs,and false increase of profits.The audit risk can be analyzed from three aspects: report level,identification level and inspection risk.Third,risk prevention: auditors should always maintain professional skepticism,apply appropriate audit techniques to high-risk areas such as steel industry inventories and provisions for impairment,and increase the unpredictability of audit procedures.Accounting firms should improve the quality of auditors,shorten the term of the person in charge,strengthen audit quality control,and assign experts to project groups when necessary.The practical significance of the above mentioned thesis is to detect and guard against fraud and potential audit risks in steel enterprises through the study of audit risks in steel companies.In order to give some suggestions and inspiration to contracted audit service organization and CPAs who are not yet experienced in auditing the steel industry,so that they can better provide assurance services and thus act as a constraint and warning against irregularities in the steel enterprises.