Research On The Audit Of Currency Funds From The Perspective Of Affiliated Financial Companies

In recent years,financial fraud has occurred frequently in my country’s capital market.Currency funds are the most liquid and extremely important of all assets,and financial fraud often affects currency funds.Whether it is a listed company or a bond-issuing enterprise,the false disclosure of monetary funds will affect the actual judgment of investors and easily infringe the interests of relevant parties.Bank deposits account for the vast majority of monetary funds.Therefore,the audit of monetary funds can often confirm their value through statements,letters,etc.,and the accounting processing or value confirmation involved are not complicated,and are generally considered to be less difficult.However,there are also failures in monetary fund audits.From 2008 to 2021,there were 13 cases of monetary fund audit failures in my country.The means by which companies conduct monetary fraud is usually concentrated in bank accounts and bank deposits.The emergence of group financial companies has brought new challenges to the audit of monetary funds.Compared with banking financial institutions,the business of the group financial company is concentrated among the member units,handling financial and financing consulting,receipt and payment of transaction payments and other services for them,and the financial company plays the role of an "internal bank".According to Wind statistics,the number of financial companies in my country has reached 273.Compared with the real bank,the "internal bank" of the financial company obviously has obvious related party attributes.Since third-party banks’ monetary fund audits frequently fail,then,for enterprises that use "internal bank" financial companies to collect funds,monetary fund auditing is more worthy of study.Through the literature review,this paper finds that most of the research on monetary fund auditing is aimed at banks,but it is seldom studied from the perspective of affiliated financial companies.Therefore,this paper chooses the novel perspective of affiliated financial companies,summarizes the theory and status quo of monetary fund auditing from the perspective of affiliated financial companies,and finally chooses Sigma Certified Public Accountants(Special General Partnership)(hereinafter referred to as "Sigma")audited the case of Yongcheng Coal and Electricity Holding Group Co.,Ltd.(hereinafter referred to as "Yongmei Holding").This case has ushered in extensive attention from the capital market due to the default of Yongmei Holding’s bonds in November 2020.In November 2020,Yongmei Holdings defaulted on its one-billion-dollar bond.Because Yongmei Holdings is a large state-owned enterprise,and there are 42.1 billion yuan in monetary funds in the 2019 annual report,the default of Yongmei Holdings directly triggered a chain reaction in the bond market,and many coal-related bonds across the country were affected.It was subsequently investigated by the Association of Dealers and the Securities and Exchange Commission.The two units disclosed that Yongmei Holdings had falsely increased monetary funds by 86.1 billion yuan and other illegal acts,and Yongmei Holdings’ monetary fund audit also entered the public’s field of vision.Henan Nenghua,the controlling shareholder of Yongmei Holding,has a financial company within the group.Since its establishment,Yongmei Holding has not achieved capital independence,but remitted all funds to Henan Nenghua Finance Company.The use of monetary funds must be approved by Henan Neng Hua before it can be used.Therefore,the monetary funds on the books of Yongmei Holdings have long been out of control and have been invested in other projects by Henan Neng Hua.From 2017 to 2019,Yongmei Holdings had the problem of inflating monetary funds,but in recent years,the auditing agency Sigma has issued standard unqualified audit reports.The CSRC has not yet concluded whether Sigma has failed the audit in this case,but judging from the existing announcements,Sigma has imperfect audit procedures.The case of Yongmei Holding’s bond default has greatly shocked the market,and its monetary fund fraud and audit issues also need to be analyzed and discussed in detail.After analysis,this paper believes that the major misstatement risks of Yongmei Holding’s monetary funds mainly exist: high deposits and loans,monetary funds account for 15%,23%,and 26% of total assets from 2017 to 2019,and assets have interest-bearing liabilities.The ratios are 48%,45%,and 47% respectively.The company’s deposits and loans are both high and the loans are much higher than the deposits.The debt repayment pressure is high,and the risk of material misstatement increases;When the company is merged,and Yongmei Holding has the phenomenon of high deposits and loans,the deposits placed in the finance company are likely to be misappropriated by Henan Nenghua or the use of funds is restricted,and further analysis of the financial status of Henan Nenghua will be conducted,found that its debt repayment pressure is very high,the debt crisis is serious,and it is possible to occupy the subsidiary’s monetary funds;at the same time,from the perspective of Yongmei Holding’s free transfer of assets to other companies in the group,Henan Nenghua The company’s control is strong and its internal control is weak;and the existence of related financial companies has provided convenience for Henan Neng Hua and other members of the group to encroach on Yongmei Holding,resulting in an increased risk of material misstatement of Yongmei Holding’s monetary funds.Therefore,in the case of an affiliated financial company,the risk of material misstatement of monetary funds of the audited entity will be relatively large.The certified public accountant should pay special attention to the audit of monetary funds to control the inspection risk.In terms of inspection risks,Yongmei Holdings audited few projects related to related financial companies by signed certified public accountants from 2017 to 2019,and Sigma has not deeply cultivated in the field of related financial companies,so the experience may be insufficient,and the inspection risk is relatively high.At the same time,Yongmei Holdings is an important customer for Sigma,and the independence of the audit may be affected.In addition,the certified public accountants did not maintain due professional skepticism to analyze the abnormal situation of monetary funds when facing the audit of monetary funds existing in affiliated financial companies,which increased the risk of inspection.Based on the above factors,Sigma has failed to audit Yongmei Holdings’ 2017-2019 annual report for false disclosure of monetary funds and other illegal activities.Through case analysis,this paper puts forward some suggestions related to the audit of monetary funds of affiliated financial companies.In the audit of the existence of affiliated financial companies,the effectiveness of traditional means of letter confirmation is weakened.Accounting firms and certified public accountants should pay more attention to the audit of monetary capital subjects.Like other important subjects,they need to strictly implement the provisions of the auditing standards and do more analysis procedures.Firstly,it is necessary to understand the specific policies and implementation methods of monetary funds between the audited entity and its affiliated financial companies.Secondly,by analyzing the proportion of monetary funds and interest-bearing liabilities to total assets,they can determine whether there are the phenomenon of deposit and loan double high,so as to judge whether its monetary funds are restricted or misappropriated,and whether the monetary funds are inflated.Thirdly,they can understand and analyze the operating conditions and debt repayment pressures of the audited unit and its parent company and brother companies,etc.to judge the possibility of occupying the monetary funds of the audited unit.In addition,they can analyze the interest rate of the monetary funds deposited in the affiliated financial company and the usual bank deposit interest rate,and compare the two.If the company’s interest rate is seriously low,then the monetary funds balance may be false high or monetary funds are occupied,they can also conduct auxiliary observation through the cash flow statement to determine whether the financial company has paid the interest of the bank deposit to the audited unit.When there are affiliated financial companies,auditors should maintain professional suspicion,treat changes in monetary funds and related situations more carefully,collect audit evidence more carefully and prudently,conduct effective analysis and preservation,and control audit risks as much as possible,so as to ensure the objectiveness and fairness of the audit results and prevent the audit failure of monetary funds.