Audit procedures; Audit responsibility; Audit independence; Institution building
The purpose of performing audit procedures is to complete the entrusted responsibility of audit, and it is precisely because of the existence of entrusted responsibility that certified public accountants need to maintain their independence in substance and form. Only when the auditor has transcendental independence can fraud be found in the audit process and exposed in the report, so as to complete the entrusted responsibility of the audit and realize the unity of procedure and responsibility. However, most of the frauds of listed companies at home and abroad are not registered accountants, but news media or other seemingly amateur report analysts. Why did the certified public accountant not only have the professional ability, but also fulfilled the necessary audit procedures, but failed to find the problems and thus failed to fulfill the audit responsibility? What affects the independence of audit? From the point of view of procedure and responsibility, this paper makes further thinking on maintaining the independence of audit in terms of the construction of entrustment system and internal control system.
I. Audit Procedures and Audit Responsibilities
When reading the audit reports of listed companies, we always see the following words at the beginning of the report: "All shareholders of a company, we are entrusted to audit your company's balance sheet, income statement, statement of changes in shareholders' equity, cash flow statement and notes to financial statements at the end of a certain year. These accounting statements are the responsibility of your company, and our responsibility is to express audit opinions on these accounting statements. Our audit was conducted in accordance with the Independent Auditing Standards for Certified Public Accountants in China. In the course of the audit, we combined with the actual situation of your company and implemented the audit procedures that we thought were necessary, including checking the accounting records. "From this statement, we can see that: because China's listed companies are reorganized from state-owned enterprises, shareholders are not shareholders in the actual sense; The responsibility here refers to the audit responsibility; Implement necessary audit procedures to obtain audit evidence about the amount and disclosure of financial statements. Audit procedures include acceptance of entrustment, due diligence, internal control and risk assessment, analysis and compliance testing. The selected audit procedure depends on the judgment of certified public accountants, including the assessment of the risk of material misstatement of financial statements due to fraud or error. In risk assessment, we should consider the internal control related to the preparation of financial statements, so as to design appropriate audit procedures to evaluate the appropriateness of accounting policies and the rationality of accounting estimates made by management, and to evaluate the overall presentation of financial statements.
In the audit process, auditors should fully consider the audit risks and implement appropriate audit procedures in accordance with the requirements of independent auditing standards, so as to be reasonably confident that they can find errors and frauds that may lead to serious inaccuracies in accounting statements. Audit procedures and fiduciary responsibilities are the specialized knowledge and experience that a certified public accountant working as an independent auditor should have. After proper professional training, he has sufficient analysis and judgment ability. Therefore, auditors should abide by professional ethics, adhere to the principles of independence, objectivity and impartiality, conduct audit business with due care and express audit opinions. However, from the audit of the listed company Kelon Electric Appliances by Deloitte, a world-renowned accounting firm, it was found that Andersen refused to issue an audit opinion of 200 1 for Kelon, believing that Kelon had uncertain assets. Deloitte issued a qualified audit report on Kelon's annual report in 2002, an unqualified audit report in 2003 and a qualified audit report on Kelon Electric Appliances in 2004. In 2005, the CSRC began an investigation, and basically found that the main problems of Deloitte's audit of Kelon were: inadequate and inappropriate audit procedures, and no major mistakes were found in Kelon's cash flow statement. These problems mean that Deloitte auditors have violated the Interim Regulations on the Administration of Stock Issuance and Trading, the Securities Law and the Criminal Law. Later, KPMG published an investigation report on Kelon, and the results showed that Deloitte did not find billions of abnormal cash transactions in Kelon. I'm afraid it's not about ability, but about professional ethics. Some experts believe that Deloitte, as the audit institution of Greencool and Kelon, has no responsibility. Therefore, it is reasonable to think that Deloitte has fulfilled its audit procedures and failed to fulfill its audit responsibilities. The annual audit fees charged by Deloitte to Kelon in 2002, 2003 and 2004 were HK$ 3.5 million, HK$ 4.2 million and HK$ 5.5 million respectively, totaling HK$ 6,543,803.2 million. "Such a high audit fee failed to identify Kelon's major financial problems, which really surprised the industry. Therefore, the interests make the CPA lose its independence, and the purchase of audit opinions appears, which leads the auditor to carefully choose not to disclose or partially disclose or whitewash the disclosure, just as Deloitte issued a qualified audit report for Kelon in 2004, which essentially whitewashes the risk intentionally or unintentionally. Therefore, whether the auditor can find major fraud in financial reports depends on the auditor's professional ability, and whether the auditor reports after finding major fraud depends on the independence of certified public accountants.
According to China's independent auditing standards, "due to the inherent limitations of the audit test and the internal control system of the audited entity, there may be some situations in which accounting statements are inaccurate and undiscovered. However, if a certified public accountant finds signs that may lead to serious inaccuracies in accounting statements, he shall increase the necessary audit procedures to confirm or exclude them. " Because certified public accountants need to make more professional judgments when confirming fairness, it is difficult to stipulate the degree of professional judgments in auditing standards. Therefore, Zhu Defeng said: "The key to professional judgment lies in whether the CPA has maintained due professional attention, which is the bottom line of the CPA's responsibility."
It is essentially a fiduciary responsibility for certified public accountants to fulfill the necessary audit procedures in the audit process in order to complete the audit responsibility. In short, the procedure is the form, the essence is the responsibility, and the entrusted responsibility is the institutional basis of audit. At the beginning of the audit, the owner hired an auditor to check the property accounts for errors and fraud; Certified public accountants accept the entrustment of the owners, audit the accounts, issue audit opinions and be responsible to the owners. The purpose of the audit is only for the benefit of the owner. As long as the owner thinks that the CPA has completed the audit task objectively and fairly, he can get remuneration from the owner. Under this entrustment relationship, the remuneration of certified public accountants depends on the satisfaction of the owners, so that there is no interest dependence between auditors and operators, and certified public accountants can be protected from the threat of operators' interests, so as not to interfere with the work of auditors; If the auditor and the operator make fraud together, they may face the risk of being fired by the owner. This business entrustment mode makes a virtuous circle between the market demand and supply of audit services, and naturally forms an audit with high independence and high audit quality.
Second, the audit responsibility and audit independence
Independent audit is the external mechanism of corporate governance. The most classic explanation of audit quality in the west is that "audit quality is the joint probability that auditors discover and disclose customers' breach of contract, in which the former depends on auditors' professional ability and the latter depends on auditors' independence" Dean Gelo (1981) Watts &; Zimmerman
(1983) also believes that the demand for auditor services depends on people's evaluation of the probability of reporting default, and the probability of auditors reporting default (on the premise of default) depends on: the probability of auditors finding specific default; The probability that the auditor reports or discloses the discovered breach of contract. The former depends on the auditor's professional ability and actual investment in the audit process, while the latter depends on the auditor's independence from customers. Therefore, for a long time, the issue of audit independence has been highly concerned by academic circles and regulatory authorities, and has become an eternal topic of independent audit.
Audit responsibility is essentially entrusted responsibility. The obligation of faith originates from property rights. When the property owner entrusts the right to use the property to the agent, the agent assumes the fiduciary obligation. In other words, the principal-agent relationship of separation of ownership and management rights has been formed. As a trustee, we must fulfill the obligations entrusted by the client in the best goodwill and the most effective way, in strict accordance with the will of the owner; After completing the entrusted task, the trustee shall report to the client, and the client can only release the entrusted responsibility after agreeing (Yang Shizhan, Basic Concepts of Auditing, 1990). Under the modern company system, especially the emergence of listed companies, due to the transfer of financial capital control, a complex principal-agent relationship has been formed among shareholders, creditors and operators. Therefore, shareholders and creditors have the right to ask the operator to provide the management responsibility report of the entrusted property to reveal the operating results, financial status and cash flow of the entrusted property. Because measuring operating results and financial status is the particularity of accounting methods, the reliability of these accounting reports or accounting information is doubted. Therefore, from the institutional arrangement, an independent third party is needed to make professional and independent judgments on the accounting reports provided by operators with due professional judgment ability and diligent attitude.
Third, governance lacks independence.
The establishment and development of China's securities market has been branded by the government in many aspects. The original intention of the government to establish the securities market is to raise funds for state-owned enterprises to solve difficulties, rather than effectively allocate resources. The securities trading market is organized by the government, and the listing of new shares has long adopted "quota management and planned control", making the listing indicators a scarce resource; The issue price of new shares is not determined by the market, but by the government's price-earnings ratio multiplied by earnings per share and the profit threshold limit of additional rights issue. This makes listed companies face how to meet the requirements of the government and regulatory agencies, rather than the spontaneous demand of the market; Accordingly, the introduction of audit system is not a market demand, but a by-product of government imitating international management (Liu Feng et al., 2002). Those companies seeking listing or listing are pursuing how to meet the regulatory requirements in order to make money in the stock market. High-quality audits may expose their real performance and affect the interests of these companies. Therefore, the audit market as a whole does not need or even exclude high-quality audit. Therefore, in the securities market, the independence of auditors is only a form, but in essence it is only a foil to the securities market.
Judging from Deloitte's audit of Kelon and the current situation of replacing certified public accountants in the 2007 annual report audit, certified public accountants lack independence, but do not fulfill their audit responsibilities while performing audit procedures. Listed companies have the right to replace auditors, which reduces the audit quality and affects the efficiency of the capital market.
First, because the independence of auditors is caused by the separation of property ownership and use right, the appointment of certified public accountants should be carried out by shareholders rather than management. Therefore, we should proceed from the internal governance mechanism, continue the reform of non-tradable shares, clarify property rights, allow property owners to effectively exercise the right to supervise and manage the company's property, encourage companies to set up special committees of the board of directors, and enhance the independence of the board of directors. The board of directors, which represents the interests of shareholders, appoints certified public accountants, and the board of directors pays them, so as to curb the management from purchasing audit opinions and safeguard the independence of certified public accountants. Under the condition of maintaining independence, only by maintaining professional attention and diligence can certified public accountants find and report fraud, improve audit quality and ensure the effective operation of the capital market.
Second, the reason for financial fraud and fraud is that there are opportunities for fraud and fraud.
In the final analysis, the existence and appearance of fraud and fraud opportunities is the lack of internal control system. In order to improve the corporate governance structure, listed companies should establish an internal control system in line with the interests of shareholders, and set up an independent audit committee to ensure the safety and integrity of shareholders' assets and the reliability of accounting information, and to prevent and detect financial fraud. Moreover, while performing audit duties, auditors should check their internal control system to ensure the reliability of accounting information, which can also improve the independence of audit.
Third, we should start with the external governance mechanism and establish an effective accountability mechanism, including the accountability system for the management of listed companies and accounting firms. Mandatory information disclosure of listed companies that change auditors, describing the reasons, time and possible economic consequences of the change, and reducing the purchase of audit opinions by listed companies to improve audit opinions; At the same time, it is necessary to strengthen the system construction of the financial information disclosure responsibility of the management of listed companies and accounting firms, and improve the corresponding implementation system.
Fourth, many countries pay attention to non-audit services that obviously affect audit independence.
With restrictions, the SEC imposed the following restrictions on non-audit services in 2003: First, it was determined that certified public accountants could not provide management consulting services with the natural advantages of non-certified public accountants, and non-audit services with the advantages of certified public accountants were not absolutely prohibited, which were assessed and decided by the audit committee. With the development of China's economy and the increase of enterprise scale, non-audit services will inevitably increase. If the non-audit service is not properly supervised, it will inevitably affect the independence of audit. On the basis of learning from the experience of other countries, we should reasonably limit non-audit services, properly distinguish between audit services and non-audit services, and limit the provision of audit and non-audit services to the same customer at the same time. At the same time, the disclosure system of non-audit services should be established to guide the development of non-audit services reasonably.
In short, the CPA's performance of the audit procedure is to complete the entrusted responsibility of the audit, and the auditor who completes the entrusted responsibility or reporting responsibility must maintain its independence. To maintain its independence, it is necessary to further promote the reform of non-tradable shares, improve the corporate governance structure of listed companies, strengthen the construction of internal control system of listed companies, force auditors to change information disclosure and effectively curb the purchase of audit opinions. Certified public accountants should abide by their professional and independent professional image, express their audit opinions independently and objectively, and ensure the independence of certified public accountants.
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