A Case Study On Audit Failure From The Perspective Of Game Theor

Since the reform and opening up,the capital market has gradually prospered,and the number of listed companies has also gradually increased.With the separation of ownership and management rights,more reliable operating results need to be delivered to the users of financial reporting,which requires independent accounting firms to provide audit reports.However,in recent years,audit failures have been repeatedly banned,and the credibility of accounting firms and certified public accountants has gradually declined,and even caused a great impact on the reputation of the entire audit industry.So this paper choose the recent Ruihua of Shenzhen Suoling audit failure of the typical case of capital market,with game theory as the theory basis,respectively build accounting firms and listed companies,accounting firms and signed incomplete information between CPA dynamic game model,in-depth analysis of the specific reasons of the audit failure.Through the construction of the game model,combined with ruihua of Shenzhen ling audit failure after case study found: first,the game between listed companies and accounting firms and external regulatory environment,firm high quality audit cost,reputation,obtain excess returns,was found fraud after rectification costs,and with the increase of audit period,listed companies and accounting firms to each other strategy choice more and more clear,accounting firm provides low quality audit procedures also the higher the probability,may even be from different interest subject to have the correlation.Second,accounting firms and sign the game between certified public accountants and the external regulatory punishment,the judgment of listed company financial fraud probability,reputation loss,high quality audit cost,audit not diligently lost opportunity cost,and due to the lack of external regulation,as the increase of the auditees audit period provide serious review probability will gradually reduce,only rely on the replacement of certified public accountants can not necessarily improve the quality of audit.Based on the above analysis,this paper puts forward targeted solutions from the aspects of firms,certified public accountants and external supervision,in order to reduce the occurrence of audit failure and promote China’s audit industry to a more mature and standardized road.