Study On The Audit Failure Of Unfair Related Party Transactions

Since the 21st century,the development of Chinese capital market has entered the fast lane.More and more enterprises realize that listing can bring huge benefits to the company,and seek better development by various means.However,We can find that the problem of financial fraud is increasingly serious during or after the listing of the company.Many enterprises in order to go public,prevent being delisted or attract investors and other purposes,through a variety of illegal means to false financial statements,the use of unfair related party transactions is a more common means of fraud.Illegal guarantee,funds occupation and information disclosure by the controlling shareholder in the transaction of the unfair party will cause more significant damage to the interests of minority shareholders,and also bring devastating blow to the image of listed enterprises,which is not good for the users of financial statements to obtain correct information for investment,and make investors lose their trust in the audit report.Finally,it will hinder the development of our stock market.By studying the CSRC’s administrative penalty reports on listed companies,it can be found that a large proportion of the punished companies use unfair related party transactions to carry out financial fraud.Therefore,this paper takes unfair related party transactions as a starting point and combines Ruihua Accounting Firm to conduct an in-depth discussion on the case of SL company’s annual financial report audit failure.It can be found that the management of SL company commits fraud by illegal disclosure of debt guarantee,control of fictitious business of related party accounts,false increase of construction under construction and non-operational capital occupation and other unfair related party transactions.However,in the audit process,due to the affected independence of certified public accountants,lack of professional doubts,lack of risk identification and response of related party transactions,lack of attention to analysis procedures,and inadequate implementation of the quality control system of accounting firms,unfair related party transactions of the company have not been found,and insufficient external supervision has provided opportunities for related party transactions fraud.The combination of various factors caused the audit failure of Ruihua Institute.Therefore,in view of the above analysis,in order to reduce the possibility of audit failure,this paper should strengthen the independence of certified public accountants,pay more attention to the analysis procedure,enhance the independence of auditors,and formulate special audit procedures for unfair related party transactions.Accounting firms should enhance quality control and training of auditors,and external supervision should strengthen the intensity of punishment and supervision.This paper puts forward relevant suggestions on the audit of unfair related party transactions,provides experience for auditors in the audit of unfair related party transactions in the future,and prevents audit failures caused by fraud of unfair related party transactions again,which is of great significance for promoting healthy economic development and stable social development.