Research On Identification And Response Of Auditing Risk In Related Party Transactions

With the rapid development and rapid expansion of the capital society,the number of related companies in China has risen sharply,and the frequency of related party transactions has also increased.The criss-cross relationship has also led to a variety of connected transactions.At the same time,the audit practitioners also face higher risks in providing audit services.However,China’s related systems in relation to related party relations and its transactions are still not perfect.Although it cannot be denied that related party transactions sometimes provide convenience for enterprises and also increase efficiency,due to its own particularities,such as listed companies’,annual reports If China does not disclose certain related parties,it will make such transactions less likely to be discovered by auditors under normal circumstances,thus creating a hotbed of financial fraud and illegal purposes for the company.Over the years,the failure of related party audits seems to have reached a high period,such as Nanjing Zhongbei(000421.SZ),Beisheng Pharmaceutical(600556.SH),Zixin Pharmaceutical(002118)and so on.The reason for most of the audit failures was due to the fact that CPA did not find that the listed company concealed the existence of related transactions during the auditing process,used connected transactions to transfer assets and inflated profits and other illegal acts,and thus issued inappropriate and untrue audit reports.The failure of the audit will not only adversely affect the accounting firm and the certified public accountants,but also cause public lack of confidence in the entire audit industry and disrupt the order of the capital market.All of the above have caused the related party’s audit risk issue to become th e focus of attention in the society today.In-depth analysis and attention to the causes behind the problem has also become a top priority.This article adopts the normative research method,combines theoretical analysis with case analysis,and reviews and analyzes domestic and foreign scholars’ related research on related party transactions.It also combs domestic and foreign research results that have been achieved so far,and combines Chinese auditing standards.The relevant provisions of related party audits describe the scope of the related party and related party transactions,introduce related theories about audit risk of related party transactions,lists the forms of related party transactions that currently exist in China,analyzes the characteristics of related party transactions based on the complexity and concealment of related party transactions,and describes the characteristics of audit risks associated with related party transactions,and highlights the risks of material misstatements.This paper presents the identification and assessment of the audit risk of related party transactions,and gives corresponding countermeasures in both general and specific terms.On this basis,the main contribution of this article is to combine the case of FounderTechnology,through the analysis of related financial data to investigate the fact that Founder Technology hides the disclosure of the related parties and large amount of related party transactions,analyze the audit risk problems in this case and the causes of the audit risk.And how should the other party identif y and evaluate the risks in the related party audits,and finally provide relevant countermeasures for the case,including professional suspicion should be consistent throughout,conduct due diligence on major customers,and issue a reasonable audit report,etc.