The Defects And Reform Countermeasures Of The Company's Financial Audit System

1, the reform of the company's financial auditor engagement system.

Under the traditional accounting system, the reason why external audit is difficult to play is that the auditor is selected by the company's management or board of directors, making it difficult for the auditor to be independent from the company authorities.

There are two different views on the direction of change.

The first point is that shareholders should choose an independent auditor, that is, a shareholder can decide the auditor's choice through a procedure similar to "proxy contest" according to the auditor's reputation and offer. The duration is generally five years.

Because China has not yet introduced the system of "proxy contest", this view is more difficult to implement in China.

The second view is that the external auditor should be entrusted by the company's audit committee to make the auditor independent of the management of the company.

This practice was accepted by the Sarbanes act of the United States (Sarbanes-Oxle, Act, 2002), and this position was also adopted by China Securities Regulatory Commission.

2, the company's financial non audit services.

While providing audit services to listed companies, low audit fees often provide non audit services to audit clients.

Theoretically, auditors provide non audit services to audit clients at the same time, which is detrimental to auditor independence.

This is because the auditor's final financial report contains the auditor's Advisory value, that is, the auditor's interest is included in the financial report.

Auditors conduct audits of such financial reports is like evaluating their own work, so auditors' credibility is greatly reduced. Therefore, it is forbidden for auditors to provide non audit services to audit clients.

In fact, some non audit services have been banned in some regulations, and the focus of controversy is on advisory services.

The five major accounting firms in the United States are firmly opposed to such legislation. The reason is simple: that the Advisory Service will affect the independence of the audit. There is no empirical evidence. In addition, accounting firms need to consult business in order to attract and retain talented employees.

Sarbanes Fa of the United States did not include advisory services in the prohibited business, but it required the listed companies to disclose the consulting services provided by auditors. Thus, in reality, the possibility of consulting services provided by auditors has been indirectly denied.

China's accounting system can learn from this practice.

3, the company's financial freedom to choose jobs.

Whether a partner in charge of audit business can directly switch to a manager of an auditor's company, though it is a matter of choice of employment on the surface, many studies have shown that many former partners of accounting firms still receive pension funds, share profits, or maintain close relations with auditors of accounting firms during the management of audited listed companies.

Can accounting firms audit such auditors to be objective and independent?

There is doubt.

Moreover, it also makes it easy for accounting firms to form a long-term cooperative relationship with audit clients, thereby damaging the independence of auditors.

Therefore, if a partner of an accounting firm wants to enter the audited company as a manager, there must be a time limit. It is advisable to draw on the prohibition of competition in China's company law for three years. That is, within three years from the date when the accounting company provides audit services to audit clients, the partners of the accounting firm, the certified public accountants and their close relatives shall not be the auditors' managerial staff or employed.

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4, corporate finance expands the scope of audit reports.

According to the existing laws and regulations, the information provided by the audit report is limited to financial reports only. It only evaluates the contents of the financial reports, such as the authenticity of the information and the legality of the procedures. It does not disclose the specific process and the contents related to the company's financial reports, but the contents of the company's financial reports are not covered. It is difficult for shareholders and creditors to understand the object and process of the audit accordingly.

Therefore, the current company financial audit report should be replaced by more open documents, that is, any major issue involving the interests of shareholders and creditors, the audit report should be reacted from the perspective of audit, and then attached to the financial statements of the company's financial position.

The major problems in the audit report should include the appropriateness of the corporate governance system, the appropriateness of the internal control, the abnormal risks faced by the company, and the questions and suggestions put forward by the auditor during the audit process, and the replies of the management of the company.