Case Study On Financial Fraud Audit Failure Of Changyuan Group By Dahua Institute

It has been more than 30 years since the establishment of Shenzhen Stock Exchange.The development of China’s securities market has achieved remarkable results,bringing financing opportunities for many enterprises.Therefore,driven by huge interests,some enterprises began to commit financial fraud,and the means of fraud are diverse,followed by an endless number of audit failures.False financial information not only disturbs the audience of information users,but also destroys the normal operation of the capital market.As the gatekeeper of the securities market,accounting firms have unshirkable responsibilities.However,with the increase of listed companies and the expansion of business scale,the fraud means become more complex,and the risk of audit failure of accounting firms is also increasing.According to the statistics published on the official website of the CSRC,from2018 to December 2022 alone,the CSRC issued up to 25 fines to accounting firms.Audit failure not only brings losses to investors and creditors,but also reduces the credibility of accounting firms,resulting in public distrust of the audit industry.Therefore,analyzing how accounting firms identify fraud means,improve audit quality and reduce the risk of audit failure has a positive impact and important significance on the stable development of the securities market.Based on the audit conflict theory,the principal-agent theory and the rational broker hypothesis,this paper selects Dahua Certified Public Accountants to analyze the audit failure cases of Changyuan Group,combining the literature research method and case analysis method.It was found that Changyuan Group had multiple fraudulent methods and accumulated inflated profits of about 350 million yuan,which accounted for a significant proportion of actual operating revenue during the same period.This is a typical case of financial fraud in the acquisition target of a listed company.Then,a review is conducted on the audit failure case of Dahua Institute,and the reasons for the audit failure are analyzed: the professional level of certified public accountants needs to be improved,and the professional skepticism attitude that should be maintained is not maintained;Dahua Institute has weak risk control awareness,superficial review system,and relatively primitive data collection methods;The awkward audit delegation relationship and weak punishment for violations also provide a breeding ground for audit failures to some extent.According to the above reasons for audit failure,we can draw the following enlightenment: CPA should pay attention to new fraud means,strengthen audit skills,and strictly implement audit procedure in the audit process;Accounting firms should strengthen risk assessment procedures,strictly implement internal control systems,optimize data processing methods,and strengthen the construction of talent teams;The relevant departments of the auditing industry should change the audit delegation relationship to enhance the independence of accounting firms,promote the application of big data auditing and electronic correspondence,avoid repetitive work,return the focus of certified public accountants’ work to professional judgment,improve regulatory mechanisms,increase punishment,and promote the healthy development of China’s auditing industry and economic market.