Research On M&A Audit Risk Of Listed Companies In The Pharmaceutical Industry

Over the years,as world economy develops,mergers and acquisitions(hereinafter referred to as M&A)has been vital in a company's capital and scale expansion.Both the total amount of money and quantity of M&A in the pharmaceutical industry are massive.According to the WIND database and online materials that open to the public,the scale of pharmaceutical M&A has expanded from 2013 to 2017,more specifically,from 188 M&A deals with a total transaction value of 55.1 billion yuan in 2013 to 664 deals with a total transaction value of 244.3 billion yuan in 2017.As of September 30,2018,pharmaceutical companies'total amount of M&A transactions registered 121.6 billion in 563 deals altogether.It follows that in recent years,both the amount of money and quantity of M&A in the pharmaceutical industry have gone up.M&A involves bio-pharmaceutical enterprises,medical service institutions and many other fields with each transaction reaching up to several or even ten billion yuan.Unlike general commodity transactions,M&A are complicated and highly risky.Notably,the pharmaceutical industry has its own features.Many problems still exist in current M&A activities.Moreover,there are hidden risks in the process of M&A,and if the risks are not identified and prevented timely,chances are that M&A would fail.Therefore,professional intermediaries including accounting firms have become an indispensable part of M&A activities.The accounting firm would audit the M&A process and control the overall process of M&A activities in an effort to identify and prevent risks.With the M&A audit risk of enterprises in the pharmaceutical industry as the object of research,information asymmetry and game theory as the theoretical basis of the research,and in combination with characteristics of pharmaceutical industry,such as high risk,high return,long return on investment period,high industry barriers and high susceptibility to China's medicine policy,as well as risks emerged in the status quo and process of M&A in the pharmaceutical industry in recent years,this paper applies risk-oriented audit risk model to M&A audit,and analyzes audit risks emerged in the pharmaceutical industry's M&A process in terms of risk of material misstatement,inherent risk,control risk,and detection risk at the financial statement level.While auditing,the auditors are supposed to pay close attention to the macro and industry environment both parties of M&A are in,both parties' business philosophy,the asset evaluation of the acquired party,and the accounting treatment and the confirmation of the the acquirer's credit standing after the merger,etc.This paper also analyzes risks that might emerge in auditing and measures accounting firms can take to prevent audit risks with the example of a M&A case in a pharmaceutical company.In the end,in combination with the analysis above,this paper puts forward countermeasures,namely,evaluating assets,introducing corresponding specifications on M&A audit,setting up professional M&A audit institutions,improving M&A quality control and so on.It is hoped that this paper is able to offer suggestions for accounting firms to identify and prevent audit risks in the pharmaceutical industry's M&A deals and lower audit risks.