Research On The Impact Of Enterprise Excessive Diversification On Audit Risk

In the trend of rapid economic development and increasingly fierce competition,it is difficult for a single specialized operation to meet the needs of profit seeking and value-added capital.Most enterprises have begun to diversify in order to disperse business risks,seek new profit growth points,and improve business performance.However,in the process of diversification,if managers ignore the enterprise’s own capacity and operational risks arising from expansion,and aggressively pursue diversification,they may fall into an excessive state of diversification,which is not conducive to sustainable business development.Currently,research has confirmed that enterprises ignore their own development situation,and improper use of diversification strategies can have a negative impact on enterprise performance,resulting in increased overall operational risk.When undertaking such projects,auditors will increase audit fees,increase audit input,or provide non-standard audit opinions to reduce audit risk.At present,scholars at home and abroad have conducted research on the impact of corporate diversification from the perspectives of corporate performance,financial risk,solvency,and audit costs.However,few literatures have distinguished and measured the degree of corporate diversification,and on this basis,separated the stage of excessive diversification from the stage of diversification,and directly targeted research on the impact of excessive diversification on audit risk.Based on this,this article believes that distinguishing the degree of diversification and conducting judgment and analysis on excessive diversification can help auditors evaluate the impact of corporate risk on audit under excessive diversification.By studying the formation mechanism of audit risk under excessive diversification,it can help improve auditors’ risk awareness when auditing diversified enterprises,better identify and respond to audit risks,and improve audit quality.This paper takes Le TV,an Internet diversified enterprise,as a case study,and measures the degree of Le TV’s diversification by using the Hufendar index method.On this basis,it uses the EVA method of added economic value to conduct quantitative analysis on whether the enterprise is excessively diversified,separates the stage of enterprise’s excessive diversification,and studies the impact mechanism of Le TV’s excessive diversification on audit risk,And put forward relevant audit risk countermeasures.Through research,it is found that after Le TV entered the stage of excessive diversification,the main business profitability declined,the subsidiaries suffered serious losses,the capital chain was tight,the debt risk increased,the internal control failed,and the abnormal related party transactions and other operating conditions,which increased the overall business risk of the enterprise,and the audit risk also increased.The auditors may not fully identify the audit risk,The audit failed due to inadequate implementation of audit procedures and other reasons.When auditing diversified enterprises,auditors should determine whether the enterprises are excessively diversified,keep alert to the audit risks under such circumstances,and adopt active audit procedures to deal with them.