Focusing On Auditing Risk Criteria To Further Improve China'S Independent Auditing Standards

First, the necessity of drafting the auditing risk criterion in China. (1) the auditing environment faced by CPA has changed greatly.

Since the birth of independent audit, the auditing environment has been changing.

In order to achieve the audit objectives, CPA adjusts audit methods along with the change of audit environment.

Auditing methods are from account based auditing, system based auditing to risk oriented auditing, all of which are adjustments made by CPA in order to adapt to changes in audit environment.

At present, the business environment of enterprises is constantly changing, and auditing practice is changing. This requires that the standard setters will take the opportunity to ensure that auditing standards can meet the needs of the industry.

The changes of business environment of enterprises are mainly manifested in the following aspects: the increasing complexity of the organization and business activities of enterprises, the deepening of globalization and the influence of science and technology, the increasing estimation and estimation of accounting standards, and the increasing motivation and pressure of financial fraud.

(two) the misunderstanding of risk oriented auditing method.

Because of the limitations of traditional audit risk model and audit method, some large accounting firms abroad begin to explore new auditing methods.

The new audit method pays attention to the risk of major misstatement in accounting statements from the macro level of the enterprise.

As an important auditing concept and method, risk oriented auditing is attracting new attention both inside and outside the industry along with the outbreak of audit failure at home and abroad.

One view is that the audit failure of Andersen accounting firm in the Enron incident can be largely attributed to the failure of the risk oriented auditing philosophy and methods. Therefore, it is necessary to reconsider or even stop adopting the risk oriented audit method. There is also a view that the problem of China's sky office is because there is no risk oriented audit method.

All these observations indicate that people still lack a comprehensive understanding of risk oriented auditing.

Reflected in the auditing practice, some accounting firms at home and abroad have explored the risk oriented auditing method, but there are many limitations, which hide a lot of audit risks. Some pay attention to the understanding of the business strategy and business process, ignore the substantive tests of important pactions, account balances, presentation and disclosure, focus on the exception of substantive testing, pay attention to the understanding of enterprises and their environment, ignore the understanding and test of internal control, and think that internal control testing is outdated.

Due to the limited implementation of the substantive procedures, when the internal control test is not implemented or the internal control fails, the CPA can not find any material misstatement in the accounting statements.

(three) some of China's independent auditing standards have not met the requirements.

Like the international auditing standards, China's independent auditing standards are based on the traditional risk audit model and need to be perfected.

Traditional audit risk model requires CPA to control the risk of inspection through comprehensive assessment of inherent risks.

However, because the inherent risk is difficult to assess, the starting point of the audit is internal control test or substantive test.

Because of neglecting the assessment of inherent risks, CPA often ignores the macro level understanding of enterprises and their environment, such as the industry status, regulatory environment, the nature of the enterprise, and objectives, strategies and related operational risks. Direct control tests or substantive tests are easy to commit errors that can not be seen by trees.

If the enterprise or management collusion fraud or override internal control, internal control will be invalid.

CPAs do not extend the audit perspective to internal control, so they are easily deceived and cheated. They can not find the risk of misstatement caused by the failure of internal control.

(four) the international auditing and certification standards board has adopted positive measures.

First, set up a joint risk assessment working group; two, formulate audit risk criteria and achieve international coordination from the source.

The joint risk assessment working group issued the draft audit risk guidelines in October 2002, including the objectives and general principles of audit of accounting statements, audit evidence, understanding of the audited units and their environment, and the assessment of risk of material misstatement and the procedures for implementing risk assessment procedures.

In October 2003, the international audit and certification standards board held a final revision of the draft in Tokyo at the meeting, which was approved by the Committee. The audit risk criterion was formally implemented after December 15, 2004.

Two, China's drafting guidelines for auditing risk standards. The audit risk guidelines drafted by the international auditing and certification standards board have largely absorbed the advantages of risk oriented auditing methods, overcome their shortcomings, and retained the original auditing standards, which has been well received by the profession and the public.

Therefore, when drawing up audit risk auditing standards, we draw on the basic principles and necessary procedures of international auditing risk criteria, so as to achieve coordination and convergence from the source.

The basic idea is to amend the audit risk model by emphasizing the macroscopic understanding of the audited unit and its environment, including internal control, in order to fully identify and assess the risk of major misstatement in accounting statements, and design and implement control tests and substantive procedures in view of the risk of significant misstatement.

(1) drafting the "independent auditing specific criteria No. first - accounting report audit objectives and general principles" to further clarify the objectives and basic principles of accounting statement audit.

The contents include: 1. CPAs should maintain professional skepticism, plan and carry out audit work, fully consider the situation that may lead to serious misstatements in accounting statements; 2., CPA should ensure that there is no material misstatement in accounting statements, reduce audit risk to an acceptable minimum level; 3., audit risk depends on major misstatement risks and inspection risks. CPA should carry out further auditing procedures to control inspection risks by assessing the risk of major misstatements; 4., importance is related to audit risks, and CPAs should be properly applied.

The new guidelines drafted will replace the "independent auditing specific criteria No. first - accounting statement audit".

(two) amend the Independent Auditing Standard No. fifth - audit evidence, further clarify the content, quantity and quality of Certified Public Accountants' audit evidence, as well as the audit procedures for obtaining audit evidence.

The contents include: 1. CPA should make full use of the identification of various pactions, account balances, presentation and disclosure as a basis for assessing the risk of major misstatement, and designing and implementing further audit procedures; 2., the procedures for obtaining certified evidence by auditors are divided into general procedures and specific methods, and the overall procedures include risk assessment procedures, control tests and substantive procedures. Specific methods include checking records and documents, checking tangible assets, observing, inquiring, letters, recalculating, re executing and analytical procedures.

These contents relate to the revision of the independent auditing criteria No. second - audit evidence.

(three) drafted the "independent auditing specific criteria No. twenty-ninth - understand the audited unit and its environment and assess the risk of material misstatement", further clarify the procedures of CPA to understand the audited unit and its environment and to assess the risk of material misstatement.

The contents include: 1. clear the risk assessment procedures and information sources; the CPA should organize the audit project group to discuss the possibility of material misstatement in the accounting process during the audit process; 2., the CPA should understand the audited units and their environment from the aspects of the industry status, the regulatory environment, the nature of the audited units, the strategy, the operational risks and the internal control; 3., the CPA should identify and assess the risk of major misstatement of the level of accounting statements and the levels of identification of various pactions, account balances, presentation and disclosure; 4., the CPA should form an audit record of the important links in the implementation of the identification and evaluation procedures.

These contents involve merging and splitting the original "independent auditing specific criteria ninth - internal control and audit risk", "independent auditing specific guidelines No. twentieth - computer information system environment audit" and "independent auditing specific criteria twenty-first - understand the situation of audited units" and delete some of their obsolete contents.

(four) drafted the "independent auditing specific criteria No. thirtieth - the procedure for implementing the major misstatement risk assessment", and further clarified the procedures for implementing the assessment of major misstatement risks.

The contents include: 1.. CPA should formulate overall coping measures against the risk of major misstatement of accounting statements, including emphasizing the necessity of maintaining professional skepticism in the process of obtaining audit evidence, assigning more experienced or special skills auditors or invites experts to provide more supervision to audit project teams; 2., CPA should design and implement audit procedures against the risk of material misstatement at the level of recognition, including the effectiveness of test control implementation and substantive procedures; 3., CPA should evaluate whether the results of risk assessment are appropriate and determine whether sufficient and appropriate audit evidence has been obtained; 4., certified public accountants should form audit work records in the implementation of key procedures.

These contents involve merging and splitting the original "independent auditing specific guidelines ninth - internal control and audit risk" and "independent auditing specific guidelines No. twentieth - Auditing under computer information system environment" and deleting some of their obsolete contents.

Three, the impact of auditing risk criteria on the CPA in China will provide a significant role for CPA to better assess the risks of major misstatements, improve audit procedures, improve audit quality and reduce audit risks.

At the same time, it also has a significant impact on CPA in the following aspects.

The influence of CPA (1) on the auditing concept of certified public accountants.

The main line of CPA auditing is always identifying, evaluating and coping with the risk of material misstatement.

In order to achieve the audit objectives, CPAs should maintain professional skepticism in planning and implementing audit work, and fully consider the situations that may lead to significant misstatements in accounting statements.

Certified public accountants must evaluate the risk of material misstatement in accounting statements.

The new audit risk model is that audit risk depends on major misstatement risk and inspection risk. CPA must understand the audited unit and its environment, including internal control, so as to assess the risk of material misstatement and have to undergo risk assessment.

Therefore, the new audit risk model requires the audit starting point for risk assessment procedures, followed by the implementation of further audit procedures (including control tests and substantive tests) for major misstatement risks.

The auditing procedures implemented by certified public accountants must be targeted.

CPAs identify and assess risks associated with audit procedures.

In the design and implementation of further audit procedures (control tests and substantive tests), CPA should relate the nature, time and scope of the audit procedures to the risks identified and assessed, so as to prevent the mechanical utilization schedule from meeting the requirements of the independent auditing standards in the form of audit procedures.

Certified public accountants must implement substantive tests for major pactions, account balances, presentation and disclosure.

A certified public accountant's judgement on the risk of material misstatement is a kind of judgement, and there is inherent restriction in internal control. No matter what the result of the major misstatement risk is, the CPA must implement substantive procedures for major pactions, account balances, presentation and disclosure, and do not have to concentrate substantive tests on exceptions.

The influence of "two" on the audit procedure of certified public accountants.

The auditing risk standard calls for strengthening the identification, evaluation and response procedures of misstatement risk. It is necessary for CPA to adjust the audit resources in a timely manner. At the same time, it should also pay attention to possible increased audit costs and consider the audit fees in order to ensure the implementation of the guidelines.

The risk identification, evaluation and response procedures include: 1. implementing risk assessment procedures, understanding the audited units and their environment, including internal controls through the implementation of audit procedures; 2. evaluating the risk of serious misstatement from the level of accounting statements, various pactions, account balances, presentation and disclosure levels; 3., taking overall countermeasures against the risk of major misstatement at the level of accounting statements; 4. implementing control tests and substantive tests for various types of pactions, account balances, presentation and disclosure levels, and 5. assessing the adequacy and appropriateness of obtaining audit evidence.

The impact of (three) on the audit responsibility of certified public accountants.

The law of Certified Accountants in People's Republic of China stipulates that certified accountants shall perform audit business according to the working procedures determined by the rules and rules of practice.

The most important basis for judging whether a certified public accountant is to issue a report according to the working procedures determined by the rules and rules of practice is the record of audit work.

Because of the relatively low requirements of previous guidelines for auditing work records, some accountants