Audit Failure Study Based On Professional Prudence

Chinese capital market has shifted to a stage of high-quality development,and social auditing,as a witness to corporate information,is an important enabler of quality in promoting high-quality economic development.According to our auditing standards,in order to effectively regulate the conduct and awareness of auditors,improve audit efficiency and enhance audit quality,so as to prevent the occurrence of audit failures,auditors must consistently maintain professional prudence.However,despite the principle requirements of auditing standards on the content of professional prudence,auditors’ awareness is generally not yet well developed.As a result,audit failures due to a lack of professional prudence by auditors have occurred in capital market audit practice.In this paper,we will analyse the audit failures published by the SFC in general and select classic cases to conduct an in-depth study on how to prevent audit failures from the perspective of the professional prudence required of auditors.The paper firstly introduces the definition of "professional prudence"and the provisions of relevant auditing standards,explains its impact on audit failure in both narrow and broad senses,and describes the relationship between professional prudence and audit failure.Secondly,a series of manifestations of auditors’ lack of professional prudence in the audit process are analysed in depth in the light of the financial fraud of Company A:lack of professional prudence at the consciousness level,inadequate attention to high-risk matters and special matters due to insufficient professional prudence,incomplete and inappropriate audit procedures,failure to evaluate audit evidence prudently and serious lack of audit independence.On the basis of the above,recommendations are made to enhance professional prudence in auditing and avoid audit failures:to improve the basic professionalism of auditors in terms of both awareness and behaviour,to fully reflect the professional habit of professional prudence in a scientific manner in audit practice activities,to develop auditors’ awareness of independence,to help auditors detect fraudulent behaviour of the audited entity in a timely manner,and to effectively avoid the possibility of audit failures arising;and When implementing projects,auditors uphold a sense of professional prudence,pay full attention to high-risk related matters,detect abnormalities in the business situation in a timely manner,and implement targeted audit procedures and evaluate audit evidence prudently,thereby facilitating the achievement of audit objectives and improving audit quality.The research in this paper is of some guidance in promoting CPAs to improve their quality and awareness of professional prudence,to clarify the specific requirements of professional prudence in auditing practice,to improve their professional prudence and to avoid audit failures.