Reasons for audit risk

Question 1: What are the causes of audit risk I. Audit Risk

Audit risk is the likelihood that a certified public accountant will issue an inappropriate audit opinion if there are material misstatements in the financial statements. Audit risk depends on the risk of material misstatement and inspection risk.

(a) Risk of material misstatement

The risk of material misstatement is the possibility of material misstatement of the financial statements before the audit. The risk of material misstatement is related to the risk of the audited entity and exists independently of the audit of the financial statements. In designing audit procedures to determine whether the financial statements as a whole are free of material misstatement, the CPA should consider the risk of material misstatement both at the financial statement level and at the level of identification of the types of transactions, account balances, and disclosures.

1. Two levels of risk of material misstatement.

The risk of material misstatement at the financial statement level is broadly related to the financial statements as a whole and can affect multiple determinations. This type of risk is usually related to the control environment, but can also be related to other factors, such as economic downturns. Such risks are difficult to define with respect to specific determinations of certain types of transactions, account balances, and disclosures; rather, they increase the likelihood that any number of different determinations will be materially misstated, and they are particularly relevant to the CPA's consideration of the risks arising from fraud.

The CPA's assessment of the risk of material misstatement at the financial statement level includes: consideration of the knowledge, skills, and abilities of those with significant responsibilities on the audit project team and the need for expert involvement; consideration of the appropriate level of supervisory guidance to be given to the engagement assistants; and consideration of the existence of matters or circumstances that cause the CPA to doubt the reasonableness of the auditee's going concern assumption.

The CPA also considers the risks of material misstatement in each category of transactions, account balances, and disclosures at the determination level, the results of which directly assist the CPA in determining the nature, timing, and extent of further audit procedures to be performed at the determination level. The CPA obtains audit evidence at the various transaction, account balance, and disclosure determination levels in order to be able to express an audit opinion on the financial statements as a whole at the completion of the audit with an acceptably low level of audit risk.

2. Inherent risk and control risk.

The risk of material misstatement at the determination level can be further subdivided into inherent risk and control risk.

Inherent risk is the likelihood that a particular type of transaction, account balance, or disclosure of a determination is susceptible to misstatement (which, alone or in combination with other misstatements, could be material) before consideration of relevant internal controls.

Certain categories of transactions, account balances and disclosures, and their determinations, have inherently higher risks. For example, complex calculations are more likely to be erroneous than simple calculations; accounting estimates that are subject to significant measurement uncertainty have a higher likelihood of misstatement. External factors that generate operational risk may also affect inherent risk, for example, technological advances may cause a product to become obsolete, which in turn makes inventories susceptible to valuation misstatements (valuation determinations). Certain factors within the audited entity and its environment may also be relevant to multiple, or even all, categories of transactions, account balances and disclosures, which in turn may affect the inherent risk of multiple determinations. These factors include lack of liquidity to maintain operations, the audited entity being in a sunset industry, etc.

Control risk is the likelihood that a misstatement of a particular category of transactions, account balances, or disclosures for a particular determination, which is material individually or in combination with other misstatements, is not prevented or detected and corrected in a timely manner by internal control. Control risk depends on the effectiveness of the design and operation of internal controls relating to the preparation of financial statements. Some degree of control risk always exists due to the inherent limitations of controls.

(ii) Inspection risk

Inspection risk is the risk that if a misstatement exists that could be material, either alone or in combination with other misstatements, and is not detected by the certified public accountant after performing procedures designed to reduce the audit risk to an acceptably low level. Inspection risk depends on the reasonableness of the design of the audit procedures and the effectiveness of their execution. It is unlikely that the inspection risk will be reduced to zero because the CPA does not normally inspect all transactions, account balances, and disclosures, and for other reasons. Other reasons include the possibility that the CPA may have selected inappropriate audit procedures, improperly executed the audit process, or misinterpreted audit conclusions. These other factors can be addressed by proper planning, appropriate allocation of responsibilities among project team members, maintaining professional skepticism, and supervising, coaching, and reviewing the audit work performed by assistants.

Question 2: What are the reasons for the formation of audit risk The capital market in China is growing rapidly from strength to strength. Enterprises can get huge benefits after listing, such as enhancing the company's image, raise a lot of money, shareholders personal property surge, etc., so that many IPO companies want to go public by any means to achieve their "money" purpose. Therefore, in recent years, there are more and more examples of IPO enterprises going public fraudulently, and more and more examples of accounting firms and CPAs encountering litigation. Many IPO enterprises fraudulent listing, rapid "face", performance decline, and even on the first day of listing will appear "broken" phenomenon. According to statistics, in 2010 there are 349 companies listed, of which 26 in the first day of listing fell below the issue price, accounting for 7.4%; in 2011 there are 282 companies listed, of which 77 in the first day of listing fell below the issue price, accounting for 27.3%; in 2012 there are 78 companies listed, of which 16 in the first day of listing fell below the issue price, accounting for 20.5%, the above data is quite alarming! The above figures are quite alarming. Since 2012, China's IPOs have been suspended for more than a year, until 2014 to start again. It's not hard to imagine that there is no shortage of fraudulent IPOs among these new stocks that broke on the first day.

The main body of this paper is divided into four parts, the first part is to analyze the causes of IPO audit risk, combined with the characteristics of the IPO itself, respectively, from the audit subject, the audit object and the other audit environment, three perspectives of the IPO audit risk analysis; the second part of the audit risk of the IPO audit prevention recommendations, respectively, from the audit subject, the audit object and the other audit environment, three perspectives of analysis; the third part is through a comprehensive case study to verify that the IPO is not a fraudulent IPO. The third part is to verify the correctness of the results of the previous analysis through a comprehensive case; the fourth part is to summarize the conclusions drawn from the research of this paper.

In short, China's IPO audit risk is the result of many factors *** with the same role, and to reduce the IPO audit risk can not only rely on the audit subject, but also need to ***, the China Association of Securities Administrators, the Securities and Exchange Commission and other regulators and the IPO enterprises themselves to cooperate in order to create a low-risk IPO audit market.

Question three: the reasons for the formation of audit risk and countermeasures There are three reasons for the formation of audit risk: 1 the audited unit's own management is chaotic, there is the limit of fraud, 2, the low quality of the auditors, the lack of audit ability, 3, the audit process is not wow or audit procedures failed to strictly implement.

Countermeasures: 1: the audited unit to strengthen internal controls, 2 audit institutions to strengthen business learning, 3 strict audit review of the manuscript, standardize the audit process.

Question 4: What are the internal causes of audit risk and its preventive measures I. Formation of the subjective factors of audit risk

1. The limitations of the experience and ability of the auditors. Due to the complexity of the audit object and the audit content of the wide range, coupled with the increasing reliance on audit opinions in recent years, the community has put forward very high requirements for auditors, and in the auditing process, many aspects of the need for auditors to make professional judgments, which requires that the auditors must have extensive experience and high judgment ability. However, experience and ability is always limited, due to the auditor's audit experience and ability is insufficient, resulting in the audit is difficult to meet all the expectations of the community, which will inevitably be in the audit process to issue inappropriate audit opinions, resulting in audit risk.

2. Auditors failed to maintain due professional caution. Auditing standards require auditors to maintain due professional care in the audit process, reasonable professional judgment. However, due to the varying personal qualities of the auditors, if the auditors are not strong, the audit did not maintain the attitude of professional prudence that should be held, it is bound to lead to unnecessary errors or should be carried out the necessary audit procedures have not been carried out, and thus the formation of audit risk.

3. Auditor error. If the auditors can ensure that the audit process to take the appropriate procedures and methods, then the risk will be greatly reduced. However, the auditor's experience is high and low, the ability to master the audit method is strong and weak, the auditor's errors and mistakes are sometimes difficult to avoid, they may come from the wrong judgment of the audit matter, may also come from the wrong understanding of the audit process, etc., which will lead to the generation of audit risk.

4. Audit methodology itself exists flaws and deficiencies. Modern auditing is built on the basis of sound internal control system of sampling audit, followed by the principle of cost-effective combination of the two itself is to allow the existence of certain audit risk. For one thing, it is somewhat overly dependent on the audited unit's internal control system test, although the establishment of the internal control system can reduce some of the wrongdoing in economic activities, but because of the internal control system itself inherent limitations, so that it can not avoid all the wrongdoing. For example, the audit unit occurred unforeseen business conditions, or the emergence of a more special business, the original control measures can not be applied; work procedures should be mutual checks and balances on the staff collusion and cheating; management personnel abuse of power or poor accountability resulting in the failure of the control system and so on. All of these will make the control system failure, resulting in control risk. Secondly, in the sample audit, auditors often in order to use limited cost to achieve higher expected benefits, give up a considerable part of the sample information, which makes it more difficult to give the correct audit conclusions. All of the above will cause errors in the audit results.

Second, the formation of the objective factors of audit risk

1. The objective existence of audit responsibility. In modern economic life, the scope of influence of the audit opinion is also increasing, people's economic decision-making on the audit opinion and conclusion of the degree of dependence is higher and higher. If the audit opinion is inappropriate, and the situation of the audited unit does not match, the user's judgment and decision-making will have a great impact, making the audit risk also increased.

2. The complexity of the audit object and the breadth of audit content. With the development of social economy, the continuous expansion of the scale of enterprises, the production and operation process is more and more complex, with the corresponding accounting information system is increasingly complex, the possibility of financial statement error has increased greatly; in addition, the audit scope also shows a trend of continuous expansion, the audit scope to expand to today, has been far more than the traditional auditing, increased a lot of uncertainty factors. The more complex the object of the audit, the broader the content of the audit, the greater the difficulty of the audit, the greater the audit risk.

3. External and internal business background of the audited unit. The economic environment, the characteristics of the audited unit's economic activities, technology development trends, the strength of the internal control system, the quality and quality of management personnel and other factors will have an impact on the business risk of the enterprise, which in turn affects the audit risk. This is one of the main reasons why inherent risk should be considered first in the audit risk model, and also the reason why modern auditing should first assess the internal and external environments of the enterprise in a holistic manner. The impact of the internal and external environment of the audited unit on the audit risk can be fully expressed from the audit fee, the western auditing profession to determine the audit fee, have taken into account the audit risk, especially inherent risk and business risk.

Question 5: What factors affect the formation of audit risk The complexity of the audit object and the breadth of audit content.

The information asymmetry between the auditing organization and the audited entity.

Audit environment. The environmental aspects of the causes of audit risk is very complex, the most important of which is the audit management system and the audit of the legal environment of the two factors.

Audit subjective factors. First, the auditors mainly include the quality of professional ethics and audit professional quality of two categories.

Audit methods are backward. Although in recent years computer-aided auditing has been increasingly used in the audit, but manual reconciliation, judgment sampling is still the basic method.

Question 6: What are the reasons for the formation of ipo audit risk China's capital market is growing rapidly from scratch. Enterprises can get huge benefits after listing, such as enhancing the company's image, raise a lot of money, shareholders' personal property surge, etc., so that many IPO companies want to go public by any means to achieve their "money" purpose. Therefore, in recent years, there are more and more examples of IPO enterprises going public fraudulently, and more and more examples of accounting firms and CPAs encountering litigation. Many IPO enterprises fraudulent listing, rapid "face", performance decline, and even on the first day of listing will appear "broken" phenomenon. According to statistics, in 2010 there are 349 companies listed, of which 26 in the first day of listing fell below the issue price, accounting for 7.4%; in 2011 there are 282 companies listed, of which 77 in the first day of listing fell below the issue price, accounting for 27.3%; in 2012 there are 78 companies listed, of which 16 in the first day of listing fell below the issue price, accounting for 20.5%, the above data is quite alarming! The above figures are quite alarming. Since 2012, China's IPOs have been suspended for more than a year, until 2014 to start again. It's not hard to imagine that there is no shortage of fraudulent IPOs among these new stocks that broke on the first day.

The main body of this paper is divided into four parts, the first part is to analyze the causes of IPO audit risk, combined with the characteristics of the IPO itself, respectively, from the audit subject, the audit object and the other audit environment, three perspectives of the IPO audit risk analysis; the second part of the audit risk of the IPO audit prevention recommendations, respectively, from the audit subject, the audit object and the other audit environment, three perspectives of analysis; the third part is through a comprehensive case study to verify that the IPO is not a fraudulent IPO. The third part is to verify the correctness of the results of the previous analysis through a comprehensive case; the fourth part is to summarize the conclusions drawn from the research of this paper.

In short, China's IPO audit risk is the result of many factors *** with the same role, and to reduce the IPO audit risk can not only rely on the audit subject, but also need to ***, the China Association of Securities Administrators, the Securities and Futures Commission and other regulators and the IPO enterprises themselves to cooperate in order to create a low-risk IPO audit market.

Question 7: Audit risk contains what specific factors (a) the subjective causes of audit risk formation.

1. *** Department of audit organs a few staff members of audit risk awareness is weak. Audit risk awareness in our country still needs a long-term cognitive process, at present our country *** audit organs, although the audit risk has been highly valued, but in some grassroots, the awareness of audit risk is still insufficient. If the leaders themselves on the audit risk awareness is weak, then it will also be very difficult to talk about audit risk prevention; 2. Auditors in the work process of careless behavior, improper work caused by audit risk. Some audit staff quality is not high, contrary to the professional ethics of auditing, in the audited unit of power for personal gain, falsehoods, etc., or improper work methods, bad work style, resulting in difficult to work in-depth, etc., all of which will cause the occurrence of audit risk.

(ii) the objective reasons for the formation of audit risk.

1. Audit system is unreasonable. China's *** lack of independence of the audit authority, the audit authority both by the level of *** leadership, but also by the leadership of the upper audit authority, in this case, independence and objectivity and impartiality will be affected to varying degrees, increasing the audit risk; 2. Laws and regulations are not sound. At present, China's audit legal system is not sound, in the face of continuous development, rapidly changing and complex social environment, it is difficult to adapt. Therefore, the existing laws and regulations can not audit all the new problems encountered in the process, the new situation all the norms in place. In addition, China's existing laws in the sector and local, departmental and departmental also exists between the great contradictions and conflicts, the auditor in the audit will rely on its professional judgment, which will inevitably produce audit risk; 3. Supervision mechanism is not strong. China's audit department supervision mechanism is not sound enough, *** the internal organization of the audit authority did not take into account the audit authority of the mutual constraints and separation of powers, the audit authority of the audit unit, the audit process can not form an internal constraints mechanism, but also make the management can not audit the process of management, and thus the formation of a potential audit risk.

Question 8: What are the causes of state audit risk? Analysis of the causes of national audit risk, the causes of national audit risk is multifaceted, in general, the causes of national audit risk are mainly environmental factors, audit techniques and methodological factors, personnel factors and other three factors causes. The following specific analysis of these three factors on the causes of national audit risk:

(a) Environmental factors

1, the legal environment is not sound. Existing laws and regulations on the audit activities in the process of all the new situations that may be encountered, new issues are not standardized in place.

2, the audit management system is not perfect. China's audit institutions to implement the administrative management system under the leadership of the prime minister and local principals, accepting the local *** and the higher audit organs of the dual leadership.

This management system is also the current common existence of local protectionism is difficult to break through, thus leading to the audit of the important reasons for risk.

3, the information asymmetry between the audit authority and the audited unit. Audited units of internal control system is not sound, managers and accounting staff quality, social and economic environment and accounting work characteristics, resulting in serious distortion of accounting information.

(ii) Audit techniques and methodology

Whether the assessment of inherent risk and control risk is correct, whether the evidence obtained is sufficient and effective, whether the audit process and audit methodology used is appropriate, whether the audit conclusions are appropriately expressed, whether the sampling is representative, and so on, may lead to audit risk.

(C), personnel factors

Auditors in the audit process will inevitably appear knowledge, experience and ability to lack of risk awareness, limited ability to identify risks, lack of due professional attention is more common.

The causes of national audit risk is diverse, so how to control the national audit risk, the control of national audit risk countermeasures is how, specifically can be considered from the following three aspects:

(a) Comprehensive governance of the audit environment

1, improve and improve the system of audit regulations.

2, the establishment of a reasonable audit management system.

3, rectify the social and economic environment.

(B) Strengthen the quality management of audit projects

1, the correct use of audit methods to ensure the quality of the project.

2, improve audit techniques and means to improve the quality of audit projects.

3. Standardization of audit work.

(C) comprehensively improve the quality of audit staff

1. Improve the ability of auditors to practice.

2. Strengthen the risk awareness of auditors and establish a system of accountability.

3. Improve the moral quality of auditors.

Question 9: What are the manifestations of audit risk A. Audit risk manifestations

Audit risk, refers to the implementation of the audit of the personnel in the audit process, due to the quality of the business and behavioral reasons leading to important errors or incomplete financial information and technical faults, to publish inappropriate audit opinions or make incorrect audit conclusions of the risk. Audit risk has six forms of expression.

(a) information asymmetry risk.

The audited unit and its economic activities are the object of the audit, the audit subject of the financial information and other relevant information and electronic data is the main source of information for the audit. In the audit process, the audit subject and the object between the inevitable existence of information asymmetry distribution. The audited unit in possession of the financial statements, accounting information and electronic information information is a comprehensive, complete and integrated reflection of the economic activities, is both in line with the provisions of financial accounting and accounting standards, but also does not comply with the provisions of the complete information, is in the information completely in possession of the advantage. The relevant information provided to the auditors or requested by the auditors may be incomplete, untrue or whitewashed incomplete information, and the auditors are at an asymmetric disadvantage of incomplete possession of information. Although the auditor can understand the basic situation of the audited unit through the pre-audit investigation, it is still difficult to fully and accurately grasp the implication, effectiveness and authenticity of all economic activities during the audit scope. This will give the auditor's evidence, judgment, analysis and evaluation of the behavior of the difficulty and risk, thus affecting the objectivity and fairness of the audit results, affecting the audit quality and results.

(ii) systematic evaluation risk.

At present, some industries in China's economic field are high-risk, its inherent risk and operational risk has been implied in all aspects of decision-making, operation and management. Audit institutions in the economic field of audit generally take turns, special and thematic audit approach, which is characterized by the use of prescribed procedures and methods, objective and fair evaluation of the audited unit or department of the financial situation, operating results and financial changes in the authenticity, legitimacy and effectiveness. Due to the lack of overall strength of the auditing authority, time constraints, coupled with the auditor's business quality, working ability and information technology level constraints, in the face of a large number of business management organizations, massive data and a large amount of information, there are inevitably a number of should be found but failed to find ordinary or major violations of law and discipline, should be exposed but failed to expose the typical, tendency and prominence of the problem, and bring the risk of checking.

(C) the risk of quality results.

There are many factors that affect the risk of audit results, and the most basic risk comes from the quality of the information of the audit object and the audit quality of the audit subject. First of all, the risk of inadequate or inappropriate audit evidence. Whether it is the state audit or internal audit and audit, often due to insufficient, incomplete and inappropriate audit evidence, resulting in incorrect conclusions on a certain issue. Secondly, it is due to the inexperience of the auditor, the important audit matters are not verified or not thoroughly exposed, failed to check the depth, check, check, or misjudgment, qualitatively inaccurate due to the risk. Again, the technical methods of auditing do not meet the requirements of controlling the overall risk of the risk caused by the risk. Audit should promote the prevention of risk, sound internal control, standardize management, improve efficiency as the goal, the content of the audit is the authenticity of financial revenue and expenditure, legality, norms, the audit focus on risk, management, efficiency, to expose violations of law and discipline, revealing the loopholes in the operation of the inspection of the implementation of the system of internal control, pay attention to the weaknesses of the management of the business to find out the new problems and new practices. If you want to achieve the set goals, you must consider the unfavorable factors while playing a role, control the inspection risk to the minimum, and develop strict preventive measures.

(d) Audit qualitative risk.

The main basis for determining the nature of the problems identified by the audit is the relevant laws and regulations and related regulations and internal control systems. The risk of improper characterization has a variety of possibilities: First, the citation of laws and regulations and regulations are not appropriate, or the same type of problem cited laws and regulations are inconsistent, there are regulatory authorities and departmental regulations contradict each other to produce the risk. Second, the same type of problems identified in the audit, due to differences in the level of professionalism of the auditors and lead to errors in judgment and inaccurate characterization. For example, in the case of "small treasury", there is the risk of characterizing it as "off-the-books funds" and "undercounted income", resulting in inconsistent treatment and inappropriate penalties. Third, due to a variety of evaluation and analysis of indicators is not scientific or unclear division of responsibility for the risk. The economic responsibility audit must evaluate and assess the indicators issued by the higher authorities. But at present there is no set of scientific and effective indicator system, some violations of disciplinary responsibility is difficult to grasp the definition and delineation, the definition is not allowed to cause the responsibility to fall by the wayside, the responsibility is not clearly delineated will be difficult to pursue, judging the wrong ...... >>

Question 10: The causes of national audit risk in the performance of the audit itself? The causes of national audit risk in the performance of the audit itself:

1, the audit specification system is not perfect, the audit quality assurance system has not yet been established, the audit process will produce risk.

2, the auditor's business capacity, professional ethics, legal awareness and other low comprehensive quality is the most direct factor leading to audit risk.

3, audit management is an important factor leading to audit risk. Audit management is not strict in: First, the management is chaotic, each functional department, decentralized power, to find out the problem of layers of concealment, supervision, punishment is weak; Second, the team is not refined, business is not hard, there are problems can not be found; Third, there is no system to ensure that, such as the audit accountability system, the audit project quality inspection system, and so on. Such an audit work environment, audit risk is obvious.

4, audit technology and methodology backwardness will also produce audit risk. The development of the modern economy so that the complexity of the economic business of enterprises, the audit is more difficult. Backward audit techniques and methods will make the audit behavior of low efficiency, poor quality, high risk. For example, the system-based audit model, in the system is not sound or sound but can not be ineffective implementation of the case, the results of the audit often can not reveal the major fraud, because its risk analysis is based on the internal system of the audited object, while ignoring the non-financial indicators, operational risk and other factors related to audit risk.

The so-called audit risk refers to the possibility that there are significant errors or omissions in the accounting statements and that the CPA will issue an inappropriate audit opinion after the audit.