Research On The Audit Failure And Prevention Of Ruihua Certified Public Accountants

Since the reform and opening up,China’s economy has developed rapidly,the scale and number of enterprises are also increasing,the capital market is becoming more and more mature,and more and more people begin to invest in the capital market.In order to purify the market investment environment and enhance market supervision,the audit service industry should be born,and has developed rapidly in recent years.Audit institutions audit and test the annual report data disclosed by listed companies to ensure that their data fairly and accurately reflect the operating conditions of the enterprise.Therefore,the audit report issued by an independent third-party accounting firm has become an effective proof for investors to understand the enterprise information and judge the investment direction.However,due to the frequent thunderstorms of audit business in recent years,the false information in the enterprise’s financial statements has not been effectively identified by its audit institutions,so it has issued inappropriate audit reports,so it is recognized as audit failure.A series of audit failures have destroyed the market order and reduced the social credibility of the audit industry.Some audit institutions have been affected and withdrew from the historical stage,among which Ruihua accounting firm is a very typical case.Therefore,this paper selects the case of Ruihua accounting firm’s audit failure of Furen pharmaceutical as the research object.This paper adopts the methods of literature review and case analysis.Firstly,it expounds the definition and consequences of audit failure,lists the relevant basic theories,expounds the audit conflict theory,information asymmetry theory,principal-agent theory and fraud motivation theory,and explains the basis of the topic.Secondly,it introduces the development process of Ruihua accounting firm and the operation status of Furen pharmaceutical,and reviews the detailed process of Ruihua’s audit failure of Furen pharmaceutical.Then it analyzes the financial fraud means of Furen pharmaceutical and the problems of Ruihua in the process of audit practice,and then studies the causes of audit failure from the perspectives of accounting firms,certified public accountants and audit environment.Finally,after analyzing the causes of audit failure,this paper puts forward specific measures to prevent audit failure from the perspectives of accounting firms,certified public accountants and audit environment.