Risk Analysis And Control Of Bond Issuance Audit Of The Core Subsidiary Of "Weak Mother And Strong Son" Type Group

Since 2020,the default of credit bonds issued by group companies accounts for50%,and some enterprise groups have gradually shown the characteristics of "weak mother and strong son".Among them,the default of high-rated bonds issued by core subsidiaries of "weak mother and strong son" type enterprises group has triggered a debate on whether CPAs assumed due responsibility in bond issuance audits,and has also triggered government supervision..Under this background,this study selects the bond default of Yongmei Holdings in November 2020,the core subsidiary of Henan Energy and Chemical Group as the case study object.This study is based on modern audit risk model,modern risk-oriented audit theory,enterprise group financial control model and internal capital market theory.From the perspective of external auditors,this paper examines the following two issues by exploring how the characteristics of the "weak mother and strong son" type group lead to financial fraud by core subsidiaries with strong profitability and comparing with "strong mother and weak son" type group:(1)What are the audit risks of the issuance of bonds by Yongmei Holdings,a core subsidiary of a group which "mother is weak and son is strong";(2)How can the firm effectively control audit risks when it faces to the issuance of bonds by core subsidiaries in a "weak mother and strong son" type enterprise group?In the face of the adverse impact of the characteristics of "weak mother and strong son" on the liquidity of the assets of its core subsidiary,Yongmei Holdings,which may form the pressure of financial fraud,this paper finds that the audit risks of Yongmei Holdings’ bond issuance mainly include:(1)operational risks at the financial statement level,risks of improper management of related party transactions,risks of embezzlement of interests by the parent company,and risks of failure of internal governance;(2)risk of false records in the identification of hierarchical asset and liability items;(3)inspection risks caused by insufficient risk assessment of auditors,insufficient attention to business,irregular implementation of audit procedures,and inadequate audit quality management and review.Among them,compared with subsidiaries of "strong mother and weak son" type enterprise group,the risk of material misstatement of core subsidiaries of "weak mother and strong son" is more likely to exist due to the dominant influence of related parties such as parent companies.Therefore,this paper puts forward several response strategies to control the audit risk of bond issuance of core subsidiaries of the "mother weak and strong son" type group.Innovations of this paper are as follows: using the case analysis method,in today’s more complex subject relations within enterprise groups,as well as the prominent characteristics of "weak mother and strong son" enterprise groups and the greater impact of bond defaults on the market,this paper hopes to improve the sensitivity of CPAs to the characteristics of such groups,expand the scope of risk assessment,expand the breadth and depth of risk assessment in a targeted manner,and pay full attention to the situation of parent companies and related parties;At the same time,CPAs should continue to pay more attention to bond issuance audits,adhere to risk-oriented audits,and reduce inspection risks;It also expects to help bond issuers and their affiliates standardize the internal control system,identify internal operation problems,and promote the healthy development of enterprises.Finally,at present,the case studies on the audit of bond issuance of core subsidiaries in "mother weak and strong son" type enterprise groups have not yet been rolled out in China,and insufficient attention has been paid to the potential impact of closely related parent companies and related parties on core subsidiaries,so it is hoped that the study of specific cases in this paper will slightly fill the gap in this regard.