The Exchange Inquiry Letter Affects Dahua’s Research On The Audit Risk Of ST Rongtai

As an important part of the supervision of listed companies,inquiry letters have been paid close attention to as a means of supervision.In 2013,during the deepening of the regulatory system reform,our country began to implement the letter of inquiry disclosure.Inquiry letters revealed the existence of risks in listed companies;firms return letters at the same time to enhance information disclosure of listed companies.Some inquiry letters of listed companies also require the auditor to reply,which provides clues to the auditor’s work and strengthens the supervision of the auditor’s work.In theory,the letter of inquiry can reduce audit risk,but whether the letter of inquiry can play a positive role in reducing audit risk needs further analysis and research.Based on this,the thesis takes the audit of ST Rongtai by Dahua Institute as the object of the case study.It conducts a theoretical analysis of the impact of exchange inquiry letters on audit risk by adopting the literature study method and case analysis under the guidance of signaling theory,deterrence theory,information asymmetry theory,and modern risk-oriented auditing theory.On the basis of theoretical research,this thesis then analyzes the three-year audit of Guangdong Rongtai by the Dahua Institute.Further,it analyzes the significant misstatement risk,inspection risk,and the firm’s improvement measures reflected in the inquiry.In order to verify whether the audit improvement measures for inquiry letters reduce the audit risk,this thesis conducts research from two aspects: the risk of significant misstatement of the audit object and the risk of audit subject inspection.Using earnings management,audit fees,and other indicators,this thesis concludes that the inquiry letter can effectively reduce audit risk.On this basis,it puts forward some countermeasures and suggestions for firms to reduce the audit risk from the three angles of dealing with the material misstatement risk,the risk of inspection,and the inquiry letter system itself,namely: the firm should pay attention to assessing the external environment and identifying the financial fraud risk of the audited entity in dealing with the risk of material misstatement;strengthen the communication with the audited entity in dealing with the inspection risk;in the aspect of inquiry letter system,we should strengthen the punishment of violation and perfect the return letter system.Based on the angle of inquiry letter,through the analysis of the case of Guangdong Rongtai audited by Dahua Institute,this thesis draws the conclusion that the inquiry letter can effectively reduce the audit risk,it also puts forward some suggestions on how to reduce audit risk,hoping to help firms raise their risk awareness,better identify and deal with all kinds of risks,and improve audit procedure,improve the quality of audit work,so as to reduce audit risk and ensure the high-quality development of audit industry.