Independent Audit Risk

[Abstract] CPA be behind the doomed bearer of high-income high-risk, in recent years, the accounting firm of Certified Public Accountants and the frequent occurrence of litigation, making the auditors and the audit institutions in the legal proceedings and the rising cost of compensation, losses continue to increase large, attention and prevent the audit agency audit risk has become a top priority.

[Keywords:] independent audit, audit risk, prevention measures

Independent audit is the separation of ownership and management rights of property of the product, the auditors to the audited financial statements of advice unit, make conclusions and assume the corresponding responsibility. Auditors in the audit process, all the time are in a potential occupational risk being, especially in the "litigation explosion" of the era, the high incidence of audit litigation, the audit institutions and auditors must take "deep pockets" and the "risk society" of the responsibility.

1 The concept of audit risk.

The audit of the audit profession expressed the general view that the risk: audit risk is inherent risk, control risk and detection risk result of the role. Inherent risk is the assumption that the audited internal control unit without any misstatements, omissions of financial information may be sex. Control risk is the internal control failed to prevent, correct misstatements, omissions possibilities. check risk is the auditor failed to find substantive tests that false statements and omissions of the possibilities. in general the four Audit Model the relationship between those expressed as: audit risk = inherent risk control risk �� �� detection risk. one of the inherent risk and control risk is caused by the audited entity, auditors can assess their level and can not eliminate such risks. Audit personnel in order to control the level of total risk audit can only be checked by controlling the level of risk to be.

2 Causes of audit risk.

Reasons for the formation of an independent audit risk are:

2.1 Audit method and the limitations inherent in the complexity of the audit business itself audit sampling sampling error does exist, regardless of how large the sample, if not a comprehensive review, this error will not disappear, but according to some of the characteristics of the sample infer the general characteristics can not be hundred percent reliable when. at the same time as the complexity of the audit, the auditors in the audit process can not do everything, not to units being audited financial accounts of all the Economic issues and have conducted verified, checked, so the audit can not guarantee the results of CPA absolutely true and reliable.

2.2 inexperienced auditors do not perform their professional ethics.

Auditors face of the objective environment of rapidly changing and complex audit services, coupled with their low level of audit techniques, with limited experience, resulting in the audit business can not fully grasp the risks arising from the audit. Of course, some auditors in the audit work about human , receive benefits, do not perform audit work ethic, missing important audit procedures, providing a false report would form the same audit reports and other audit risk.

2.3 the audited entity internal control weaknesses.

Sometimes managers to gloss over the financial statements, to market, borrowing and other purposes, by means of high-tech inflated revenue, reduce costs and fraud. Meanwhile, the company's managers to prevent auditors found its own problems, usually not with auditor's work, they either do not provide the required certified public accountant audit the data, either do not provide the necessary conditions, which will undoubtedly pose a risk to the audit.

2.4 Internal management audit institutions are less developed.

At present, China is not a considerable number of firms to establish or improve a strict internal quality control system, causing a Cuobi and negligence, violation of the law. Also have an accounting firm to audit quality control ineffective, and some working papers of the three-tier accounting firms control system review useless.

2.5 Lack of laws and punishment mechanism not tough enough.

Since the development of China's CPA industry short time, many laws and regulations are not very healthy, their ability to certified public accountants are less constrained. Many legal norms but a CPA certificate revoked, confiscated, fines and other administrative responsibilities and when generated when the offense constitutes a crime, criminal responsibility, there are a lot of these laws and regulations in principle, abstract terms, but ignored the victim's compensation is defective. Overall, China's laws and regulations is not yet complete, the provisions requirement is not very clear, need to improve relevant legal systems. [Research Papers Download hi138.com]

3 Prevention and control of audit risk.

3.1 Audit method selected.

Modern audit methods and audit risk are very closely related to the audit staff to use modern scientific methods and Technology, local conditions, select the appropriate audit approach, but also should gradually increase the level of the computer audit staff to improve audit quality and reduce the risk of audit .

3.2 carefully select the audited units.

Prevention and control of audit risk depends largely on the customer's operating results and business behavior, so to maintain good communication with customers, understand the client's financial risk and operational risk, audit risk to guard against and defuse an important factor. In addition For the business too risky not to undertake. customer selection is not just for new customers, when the new management of existing customers there, in financial difficulties and other matters of audit risk, the need to re-assess their risks and consider whether to commission work.

3.3 improve the professional skills of auditors and maintain due professional care.

Audit staff to enhance professional training, focusing on the accumulation of experience and strive to improve the level of practitioners in practice, during practice at the same time maintain a responsible attitude always, careful to make professional judgments. More importantly, auditors continue to strengthen the legal awareness, responsibility awareness and risk awareness, the decision to develop ethical guidelines, the establishment of appropriate enforcement agency in the event of breach of professional ethics phenomenon, which requires both the executive arm of the award, but also a corresponding enforced so that a truly workable ethics sex.

3.4 Extracting risk fund or to purchase liability insurance.

To prevent the risk of audit risk of the extraction of funds or insurance professional liability insurance is a very effective measures. In Western countries, adequate liability insurance coverage is a very important accounting firm protection measures, although not exempt may be subject to legal proceedings, but can failure to prevent and reduce litigation accounting firm's financial losses occur. Our accounting firm should also provide for establishment of a professional risk fund as required and undertake professional insurance.

3.5 Strengthening the internal management of the audit agency.

To ensure audit quality, in addition to the audit staff should strictly enforce the auditing standards and ethical practice, the auditors should also establish and improve internal audit and control institutions and ensure that each audit staff are always practicing in accordance with the requirements of professional standards to ensure the quality of the audit.

3.6 strengthen the legal system, increase the punishment.

First, modify and improve the existing law, violations of law and the corresponding responsibility to further refine further clarify the liability of Certified Public Accountants. At the same time, improve the audit litigation system, formulate a unified, workable legal liability CPA auditing procedures for the identification so that the liability of certified public accountants audit, especially civil liability be implemented, improve the legal responsibility to act, certified public accountants rigid constraints.

3.7 to strengthen the external supervision, improve the community focus.

CPA Audit should be strengthened regulations and guidelines related to advocacy, awareness of the general public the ability to conduct certified public accountants. While using a variety of media tools falsifications of CPA exposure, enhance public opinion of Certified Public Accountants audit. [Free papers Download Center]

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