Case Study On Audit Failure Of Ruihua Certified Public Accountants Llp To Kangdexin Composite Material Group

In recent years,the rapid development of China's capital market has also highlighted many problems.In a complex market environment,the audit has the function of authenticating the financial information of the audited entity,and has always played an important role as "economic policeman".The importance of the audit is self-evident.However,due to the increasing complexity of market conditions,the wide variety of businesses involved in listed companies,and the inherent limitations of auditing,the difficulty of CPA audits continues to increase,and the risk of audit failures also increases at the same time.Audit failure will affect the interests of investors to a certain extent,and it will also greatly affect the reputation and future development of accounting firms and certified public accountants,and will also affect the credibility of accounting firms and certified public accountants,which is not conducive to audit development and healthy operation of the capital market.Among the many audit failure cases in 2019,this article chose Ruihua to study Kangdixin audit failure case for the following reasons: First,as one of the “Big Eight” accountants in China,Ruihua has a considerable position in the industry and the influence has been repeatedly punished by the China Securities Regulatory Commission in recent years.Secondly,Kangdexin Financial Fraud is the largest cost since the establishment of China's securities market,and the time involved(4 years)is very serious.This article will analyze an example of Ruihua 's failure of Kangdexin audit,and explore the reasons for its audit failure from multiple perspectives.It is hoped that it can attract the attention of the capital market and reduce the possibility of audit failure.This article first summarizes the rich research results on audit failures at home and abroad,analyzes the causes of audit failures and related prevention and control suggestions in a macroscopic way,and summarizes the current research results of Kangdixin's financial fraud.Secondly,using the case study method,it reviewed the background of Ruihua's failure of Kangdixin's audit,and detailed the relevant facts of Kangdixin's financial fraud.Based on this,it combined with modern risk-oriented audit theory and audit conflict theory.Analyze the reasons for audit failures from three perspectives: accounting firms and certified public accountants,audited entities,and external supervision.In the case of Ruihua's failure of Kangdixin's audit,the main reasons for the failure of the audit are: the accounting firm did not fully evaluate the audited unit's environment and audit risks,the quality review system was flawed,and Ruihua's merger management of the firm existing problems,CPAs did not maintain due professional suspicion,and did not implement effective audit procedures to deal with risks;equity pledges increased the possibility of fraud,and there were major problems in internal control of the enterprise;in terms of external environment,audit market competition was not standardized,and supervision with insufficient punishment.Based on the above three reasons,this article will put forward corresponding prevention and control recommendations: accounting firms should fully understand the audited unit and its environment,strengthen the construction of the quality control system of the accounting firm,and strengthen the integrated management after the merger of the firm certified public accountants should maintain due professional skepticism and design and implement appropriate audit procedures;the audited unit should optimize the corporate governance mechanism and strengthen the functions of the board of directors and the board of supervisors;at the external regulatory level,it should regulate the audit market,reduce vicious competition,and improve risk supervision system and strengthening of punishment,regulating the behavior of major business cooperation units in the audit process.