Research On Audit Risk Of Related-Party Transactions And Its Prevention

As a result of economic growth and the increase in the size of listed companies,the frequency of abnormal connected transactions between listed companies is increasing,and the cases of CPA being punished are also increasing.The hidden and complex character of related party transaction is the reason of its high frequency,and it is also the risk point of CPA audit.With the recent promulgation of the No.8 Guidance on the Supervision of Listed Companies--Regulatory Requirements on Capital Transactions and External Guarantees of Listed Companies,the intensity of the inventory and accountability of the matters of capital occupation and guarantee has been increased.As a third-party regulatory agency,accounting firms should also be paid attention to.At the same time,based on the policy background of "capacity reduction" in the basic chemical industry,companies in this industry face challenges.Many companies whitewash their statements through related party transactions.So it is necessary for certified public accountants to learn relevant experience and lessons from related party transaction audit cases,standardize audit procedures,improve audit quality,protect statement users’ right to know,and reduce their own audit risks.This paper takes Guangdong Rongtai Industry Co.,LTD as an example.Based on the violation facts of the company’s related parties and related party transactions in 2018 and 2019,such as non-disclosure of related parties and related party transactions,fictitious related party transactions occupying company funds and fictitious related party transactions in order to increase profits,and the punishment status of the audit failure of related party transactions of Zhengzhong Zhujiang Certified Public Accountants in 2018,In order to provide reference for the major accounting firms to effectively discover and identify the significant related party transactions and their potential risks,the failure experience of related party transactions is learned and the methods of audit quality improvement are explored.Based on the background support provided by information asymmetry theory and principal-agent theory,and the main line of research formed by modern risk-oriented audit theory,this paper analyzes and studies cases through literature research method and case study method,aiming to enrich the cases of existing related party transaction means and the common means of falsely increasing profits through related party transaction.And through common means of audit risk analysis to provide audit risk prevention suggestions for certified public accountants.This paper explores the prevention suggestions of audit risks through the audit problems of related party transactions in the case as follows: First,for the risk of material misstatement at the level of financial statements,CPA should give an extra attention to the company’s continuous operation risk and industry development;Pay special attention to the corporate governance structure,the existence of the dominant position of the actual controller;Effectively identify internal control risks and effectively operate internal control.Secondly,in view of the risk of material misstatement at the identification level,CPA should pay attention to the real risk of monetary funds and the high characteristics of both deposits and loans.Accounts receivable bad debt risk,bad debt provisioning,etc.,to ensure that the dynamic process of risk assessment,at any time to adjust the implementation of more targeted audit procedures.Thirdly,in view of inspection risks,CPA should always maintain professional suspicion and further obtain sufficient and appropriate audit evidence if abnormal situation is found.Accounting firms should continuously enhance the professional quality of certified public accountants and strengthen the control of audit quality.In the subsequent audit of related transactions,certified public accountants can ensure audit quality and reduce audit risks to a higher degree based on their understanding of common means of related party transactions and their concerns in audit risk prevention suggestions.