Research On Material Misstatement Risks Identification In GEM IPO Auditing

With the complication of enterprise organization and economic business,the basic audit of accounts and system audit will partially fail for management fraud and “one-set fraud”.Therefore,auditors are required to jump out of the shackles of documents,books and statements,and comprehensively analyze and evaluate various factors affecting the economic activities of auditees on the basis of risk identification and evaluation of auditees,and carry out key audit scope according to evaluation results.Since the GEM board was opened in China,the growth and market risks are higher than those of the main board.Due to the weak internal control resulting from the development of small and medium-sized private enterprises,a fertile soil has been created for fraud and the operating risks are greater.Therefore,in order to ensure the quality of GEM listed companies,as an important link of GEM IPO audit,the identification of major misstatement risks needs to be paid attention.However,this step is often ignored by certified public accountants,which only takes zero to half a month in actual work.Therefore,on the basis of modern risk-oriented auditing,system theory and CBR theory,this paper makes in-depth research on the current risk identification factors and methods,IPO auditing and GEM IPO auditing related documents,and innovatively establishes a major misstatement risk identification and analysis framework for GEM IPO auditing based on LEAD rule.After analyzing the problems of Tianjian in identifying major misstatement risks,this framework is used to provide countermeasures for risk identification.After research,the conclusion is drawn.It is found that Tianjian has the following problems in the three-layer risk identification of the external operating environment,the internal structure of the company and the real growth ability of GEM enterprises:(1)In the risk identification of the external operating environment,there is a lack of linkage analysis between macro-environment fluctuation and the strategic contradiction of the enterprise,a lack of comparative analysis of the same industry,and a lack of multi-confirmation of the rationality and fairness of the price fluctuation of upstream enterprises' products;(2)In the risk identification of the company's internal structure: lack of attention to related party transactions within and outside the reporting period,lack of understanding of the audited unit's process flow;(3)Risk identification of real growth ability of GEM enterprises: lack of interview and inquiry procedures for customers,lack of attention to abnormal phenomena of key financial indicators,vertical analysis,limited scope of horizontal audit,etc.In view of the above problems,we should not pay more attention to a certain point next time because we have missed a certain point in risk identification this time.We should improvethe identification thinking and systematize the thinking of audit risk identification.Therefore,drawing on the LEAD rule of improving the inverse quotient in Paul Stoze's inverse quotient theory,the psychology theory is applied to the field of auditing,and then combined with modern risk-oriented auditing,system theory and CBR theory.this paper innovatively puts forward a set of improved framework for identifying major misstatement risks in GEM IPO based on LEAD rule,and combines with Tianjian's problem of risk omission to improve the identification thinking.There are four specific steps:(1)to recognize the areas where the risk of major misstatement in IPO auditing of GEM exists;(2)Clearly explore the assessment content of the risk of material misstatement;(3)Screening out risks related to the audited entity;(4)As well as the optimization of the audit risk identification procedures.Each step puts forward specific contents and methods,and according to this rule,puts forward improvement countermeasures for Tianjian and how to systematically use LEAD rule to identify risks.This article hopes to improve the audit quality by studying the audit case of Tianjian Certified Public Accountants to solve the problem of missing the risk of material misstatement in IPO audit of GEM.