A Case Study On Audit Failure Of Major Shareholders' Encroachment On The Interests Of Listed Companies

In recent years,with the development and continuous improvement of China's capital market,backdoor listing has gradually become an important way for some listed companies to solve financing problems because of its simple process and short listing time.However,some large shareholders of listed companies take the opportunity to seek illegal profits through financial fraud and related party transactions,which brings great harm to companies,intermediaries and small and medium shareholders.On July 8,2019,Huaze cobalt nickel,the poorest listed company,has been delisted,but its aftereffects are obviously worthy of constant consideration by accounting firms and certified public accountants.As early as 2013,Huaze cobalt and nickel had a great reputation after the listing of borrowed shell * ST Juyou,but only two years later,they received the administrative supervision book,and their performance fell sharply.In 2018,China Securities Regulatory Commission imposed administrative penalties on Huaze cobalt nickel for its connected transactions and large amount of illegal guarantees after listing.As an auditor,Ruihua's reputation and credibility were greatly challenged,and this big case which shocked the capital market came into the public view.The concealment and novelty of Huaze cobalt nickel's methods of financial fraud and embezzlement of listed companies give a vivid lesson to the auditing industry such as China's accounting firms.Taking the audit of Huaze cobalt nickel listed company by Ruihua certified public accountants as an example,this paper explains the specific ways of Huaze cobalt nickel's financial fraud and misappropriation of listed companies,as well as the loopholes and defects of intermediary and regulatory agencies for the unique audit risks after the reverse acquisition and listing.Taking this case as an example,this paper analyzes the causes and consequences of Huaze cobalt nickel audit failure by using the financial fraud motivation theory and audit conflict theory.In addition,it summarizes the key factors that affect the audit failure,from the equity structure and corporate governance mechanism of Huaze cobalt nickel,to financial fraud and related transactions,to the CPA's response to the audit risk of related transactions,and finally to China's legislature and regulatory department to conduct special research on the major shareholders' occupation of listed companies.In this regard,this paper summarizes the important measures to avoid audit risks,which are summarized as follows: first,we should prudently undertake the audit work of the family enterprise with imperfect corporate governance mechanism and "one share dominating";second,we should evaluate the audit risks in an all-round way,and focus on the abnormal data andnon-financial information compared with the audit history;Third,China should improve the securities law and relevant laws and regulations,increase the cost of malicious violation of laws and regulations,and the CSRC should strictly enforce laws and regulations,create a good external environment for the liquidity and standardization of China's capital market,and finally summarize the measures of general financial fraud and market company occupation,so as to realize the positive and healthy development of China's securities market.