A Case Study Of Audit Failure In Iron And Steel Enterprises

In recent years,the development of the capital market has played a catalytic role in the transformation of the social economy,and the auditing industry has also developed rapidly,gradually becoming an indispensable and highly valuable component of the macro-monitoring mechanism of China’s socialist market economy.Accounting firms are the main body of financial information audit,so they play an important role in audit.After auditing the target company,the auditor issues an audit report based on the financial status of the audited entity that can help investors and provide an important reference for their investment.However,with the rapid development of China’s socialist market economy,some problems in the capital market have emerged,the most prominent of which is audit failure.The occurrence of audit failure will not only damage the relevant rights and interests of investors,but also lead investors to question the audit authority,which is extremely detrimental to the development of the capital market.The China Securities Regulatory Commission and other relevant authorities have strengthened the penalties for violations in audit failures,which means that the audit failure phenomenon has become an issue of concern to the society and even to the country.This paper will start with steel enterprises,which can not only enrich the research content related to audit failure,but also guide the standardized operation of steel enterprises.Fushun Special Steel Co.,Ltd.is not only as a benchmark of state-owned enterprise and special steel industry,but also a mixed ownership reform enterprise,so it is representative to take it as the research object.Based on the information asymmetry theory,principal-agent theory,fraud motivation theory,this paper describes the fraud methods of Fushun Special Steel by using the case method,and summarizes the reasons for the audit failure of China Special Steel according to the preliminary business activities and planning audit work stage,risk assessment stage,risk response stage and audit completion stage.Finally,it puts forward corresponding countermeasures and suggestions for preventing audit failure in the above four stages.This paper found that in the process of initial business activities and audit planning,the CPA and the Zhongzhun Certified Public Accountants lacked a strong independence and ignored the business conditions of the company when undertaking the business.In the risk assessment stage,due to the lack of sufficient attention to the target audit,the governance structure of Fushun Special Steel has not been given,and the auditors have insufficient understanding of the characteristics of the steel industry.In the risk management,the relevant audit staff did not perform their duties diligently,and they lacked effective substantive procedures for key audit projects,and did not have sufficient inventory supervision and working papers,which led to serious mistakes in audit work.In the stage of audit completion,the audit firm has not established an effective review system,which leads to major defects in the failure,and there are major defects in the control test procedure.Based on these issues,it is recommended that during the initial business activities and audit planning process,the internal management of the firm should be strengthened and the audit tenure should be shortened;during the risk assessment stage,due attention should be maintained to the internal control system of the company and attention should be paid to the impact that industry policies may have on the company;during the risk treatment process,professionals should be hired to perform strict inventory monitoring and control testing procedures to maintain professional skepticism;during the completion of the audit stage,the firm should strengthen the review of the audit working papers and enhance the quality management system of the project.