A Brief Discussion of Audit Risks and Their Causes

As a crucial supervisory department overseeing economic operations,the audit department plays a pivotal role in safeguarding the healthy development of the country’s economy,exposing corruption,and effectively maintaining social and economic peace and stability.The work of auditing involves detecting existing issues,providing remedies,and consistently contributing to national governance.However,as the market economic environment undergoes continuous changes,legal systems advance,and the audit environment becomes more complex,audit risks have gradually gained prominence.The prevention of audit risks has increasingly captured the attention of audit agencies at all levels.This necessitates audit institutions to continually adapt to new challenges,comprehend risks,and exert effective control over them.This article delves into the causes of audit risks,exploring ways to effectively identify and respond to these risks within a complex and ever-changing environment.The objective is to ensure the objectivity and accuracy of audit reports,allowing the audit function to truly serve as an“immune”system,protecting public interests.

Application of Monetary Unit Sampling Based on Extended Audit Game

On account of the lack of monetary unit sampling( MUS), an extended audit game model based on uncertainty information,which centers on audit risk and combines audit game with statistical sampling,is established to improve the effectiveness of audit risks analysis and sampling errors control. In this paper,an example concerning practical problems is given to demonstrate the process of extended audit game and confirm the truth of the effectiveness of the method. Not only does this method enhance the role of audit technology and the extension of audit procedures in deterring material irregularities,but also helps the auditors measure and control audit risk and sample sizes under uncertainty,conducive to improving the effect of cost control,risk evaluation,and decisionmaking optimization in audit sampling.

Disclosure of Critical Audit Matters,Audit Risk and Audit Opinion

We explore the association between the number of critical audit matters and auditing opinion based on the Chinese capital market data.In addition,we investigate the effect of audit risk on the relationship between the number of critical audit matters and auditing opinion.Using 6,662 firm-year observations listed in the Chinese capital market from 2017–2019,we find that the number of critical audit matters has significantly positive association with clear audit opinion.Specially,the greater the number of critical audit matters,the more likely getting clear audit opinion.We also find that the audit risk restricts the effect of the critical audit matters on the audit opinion.Lastly,we find that Big4 accounting firms are less likely to be influenced by the number of critical audit matters;the audit complexity restricts the effect of the critical audit matters on the audit opinion;the more board members,the less effect of the number of critical audit matters on the audit opinion.We also use several robustness tests to strengthen the conclusion.Our research may contribute to the understanding of the new audit standard.

Auditor Experiences, Accounting Firm Size, and Client Ownership

This study investigates whether accounting firms match the experience level of individual auditors with the risk level of clients in order to control audit risk. We find that accounting firms tend to assign more experienced auditors to non-state-owned clients that typically have higher tendency to engage in earnings management. Such an assignment pattern is more pronounced for non-Big 4 accounting firms. Further analysis suggests that auditors＇ experience helps reduce clients＇ earnings management level, proxied by abnormal accruals, and thus improves the audit quality. This study enriches the literature on the allocation of human resources and the risk control mechanism in the audit services industry, which has been seldom explored in prior studies.