Audit Supervision Research Articles

Evaluation of SIMRAL with CIPP Model on the Performance of State Civil Apparatus (ASN)

SIMRAL is used to manage APBD (Regional Government Budget), planning, budgeting, implementation, reporting, accountability, and audit supervision. Therefore, its series is long and unbroken. This study evaluates SIMRAL's effect on the performance of civil servants in the PUPR (Public Works and Spatial Planning) office of Bogor City to achieve performance at the individual, unit, or organisational level. The objective of this study is to evaluate the effectiveness of SIMRAL usage and the performance of civil servants in the PUPR office of Bogor City. The research method used is a mixed-method approach, with an evaluative program/policy approach using the CIPP model. This method focuses on evaluating four main components: (1) SIMRAL usage policy and objectives, (2) human resource quality, (3) SIMRAL application process, and (4) the output and outcome of SIMRAL usage. The output of this research is a policy recommendation on using SIMRAL, considering the mayor's regulations, work effectiveness-efficiency, human resource performance competency, service quality, budget control, and proper decision-making. SIMRAL also continuously enhances work motivation and quality.

The stronger the ability, the greater the destructiveness? CEO ability and stock price crash risk

The impact of CEO ability on corporate behavior is dual-faceted. Based on the “rent-seeking hypothesis”, this paper focuses on the “dark side” of CEO ability and suggests that CEO ability may hurt corporate behavior. Using the DEA method to measure CEO ability and selecting Chinese A-share listed companies from 2007 to 2017 as a sample, we examine the relationship, mechanisms, and boundary conditions between CEO ability and stock price crash risk. Our study finds that CEO ability exacerbates stock price crash risk positively. Mechanism tests based on CEO tenure, agency conflict, and litigation risk reveal that CEO ability intensifies stock price crash risk for alleviating career concerns, seeking private gains, and risk avoidance, supporting the “rent-seeking hypothesis”. Boundary condition tests based on internal and external governance environments show that internal control quality and external audit supervision can play a governance role in mitigating the exacerbating effect of CEO ability on stock price crash risk. The conclusions are of significant importance for companies, relevant departments, and global market participants to strengthen governance and supervision to prevent the negative impact of CEO ability on stock prices, thereby promoting the stable development of global financial markets.

A Study on Audit Failures by Certified Public Accounting Firms

Audit failure occurs when certified public accountants (CPAs) fail to disclose significant misstatement risks in the audit report. Such failures frequently lead to various degrees of social harm. Therefore, it is crucial to investigate the causes of audit failures to address these issues fundamentally and prevent their occurrence from different angles. This paper examines audit failures from four perspectives: chaotic audit pricing, inadequate audit preparation, substandard CPA audit competence, and insufficient supervision of auditors. It proposes specific methods to reduce audit failures, including optimizing pricing, enhancing pre-audit preparations, refining audit procedures, and improving audit supervision.

A Study on Audit Failures by Certified Public Accounting Firms

Audit failure occurs when certified public accountants (CPAs) fail to disclose significant misstatement risks in the audit report. Such failures frequently lead to various degrees of social harm. Therefore, it is crucial to investigate the causes of audit failures to address these issues fundamentally and prevent their occurrence from different angles. This paper examines audit failures from four perspectives: chaotic audit pricing, inadequate audit preparation, substandard CPA audit competence, and insufficient supervision of auditors. It proposes specific methods to reduce audit failures, including optimizing pricing, enhancing pre-audit preparations, refining audit procedures, and improving audit supervision.

Administrative audit regulation and the quality of accounting information: Evidence from China securities regulatory commission’s random inspection system

Based on the “double random” inspection system implemented by the China Securities Regulatory Commission (CSRC) on accounting firms, our study uses staggered DID method to examine the effect of administrative audit regulation on the quality of corporate accounting information. The results suggest: (1) The administrative audit regulation can effectively improve corporate accounting information quality; (2) The mechanism test reveals that the administrative audit regulation improves the quality of accounting information by improving internal control; (3) Further study reveals that the governance effect of the administrative audit regulation is more pronounced for firms with non-Big four auditing, high risk of misstatement and more agency costs. Our study investigates the governance effect of the CSRC’s random inspection system on the quality of corporate accounting information, providing theoretical and empirical evidence for the effectiveness of administrative audit supervision from the perspective of corporate accounting information system.

Research on Audit Problems and Countermeasures of "Special Fund for Nutrition Improvement Plan" of Y Audit Bureau

The implementation of the nutrition improvement plan for rural compulsory education students is an important policy measure for the state to promote educational equity and improve the nutritional status of students in poor areas. The audit of special funds for nutrition improvement program can test the implementation effect of the policy, and standardize the allocation, management and use of funds in education finance and other departments.Y Audit Bureau is the government agency in charge of auditing of Y Municipal People's Government. In September 2023, Y Audit Bureau led the audit of special funds for the nutrition improvement Plan for rural compulsory education students, focusing on policy implementation, fund distribution and use, food safety, etc., promoting the implementation of the nutrition improvement plan policy through audit supervision, and safeguarding the vital interests of rural compulsory education students. Taking Y Audit Bureau as an example, this paper summarizes and refines the key points of the audit work of the nutrition improvement plan, in order to provide reference for relevant auditors and management departments.

A study of the impact of staggered boards on corporate financialization: from the perspective of board governance.

The objective of this study is to assess the influence of staggered boards on corporate financialization and the role that incentive and supervision mechanisms play in this process. We employ a total of 20,647 panel data samples of Chinese A-share listed companies over the period 2011-2020 to empirically test the impact of staggered boards on corporate financialization in the Chinese context. The results indicate that implementing staggered boards significantly increases levels of corporate financialization. On the one hand, the implementation of a staggered board structure can exacerbate the speculative mindset and profit-driven behavior among board members, leading management to prioritize financial investments for personal gain. On the other hand, a staggered board system may also amplify managerial laziness, potentially incentivizing them to rely heavily on financial investments in order to swiftly achieve performance targets with minimal effort. Furthermore, both managerial ownership and audit supervision are found to be critical factors in mitigating this positive impact and preventing excessive financial investment behavior. This paper offers guidance on comprehending the applicability of staggered board provisions and mitigating financial risks in enterprises.

Multiple large shareholders, earnings management, and operating risk: Empirical evidence from China

This study uses the annual financial data of Chinese A-share listed firms from 2010 to 2020 to investigate the relationship between multiple large shareholders (MLS) and earnings management (EM). After analyzing the samples using the Ordinary Least Squares (OLS) model and endogenous switching regression (ESR) model, the empirical results show that the presence of MLS can increase corporate EM activities and the MLS have a significantly positive effect on EM in both the treatment and control groups. In addition, this conclusion still holds after conducting multiple robustness tests. The cross-section analysis shows that the external audit supervision quality, institutional shareholders, and the uncertainty of the external economic environment have significant impacts on the baseline model results. Lastly, mediation effect analysis shows that the presence of MLS increases the corporate operating risk through EM activities. The conclusions of this paper are critical for policymakers to supervise China’s capital market, improve the level of corporate governance of China’s listed firms, and further promote reform of ownership structure.

Research on the Impact of Financing and Short selling System on Audit Quality

The margin trading and securities lending system, as a new type of financial tool, has a significant impact on the Chinese capital market, affecting audit quality from the perspective of credit information disclosure. This article selects A-share listed companies in Shanghai and Shenzhen from 2007 to 2023 as samples and uses a double difference model to study the impact of margin trading and securities lending on audit quality. Research has found that after the implementation of the margin trading and securities lending system, the audit quality of margin trading and securities lending target enterprises has significantly improved compared to non-margin trading and securities lending target enterprises. Therefore, while improving the margin trading and securities lending system, we should leverage the combined efforts of internal control and audit supervision to improve audit quality.

Commonality in liquidity and corporate default risk - Evidence from China

We investigate the impact of commonality in liquidity on corporate default risk. Using the sample of Chinese A-share listed companies from 2009 to 2019, we find that commonality in liquidity significantly increases corporate default risk. This effect is achieved by increasing firm’s financial constraints and reducing the firm’s solvency. We further find state ownership, information disclosure, institutional investors’ shareholding, audit supervision, prefecture level marketization process and digital finance development can weaken the impact of commonality in liquidity on corporate default risk.

Regulatory Role of Financial Performance on Internal Control and Audit Costs: Evidence from China

With the development of China's economy, many problems such as financial fraud have gradually appeared in the market environment, which has a very adverse impact on the sustainable development of China's economy. At the same time, the importance of audit supervision has become increasingly prominent. Therefore, the relationship between the internal situation of enterprises and external audit needs to be further studied. This paper discusses the relationship between internal control, financial performance and audit costs, focusing on how financial performance plays a role in the relationship between internal control and audit costs. In the following sections, we will explain how internal controls and financial performance affect audit costs.

Legal Forensics System Based on Data Mining

The existing forensics systems are developing in a more and more perfect direction in terms of forensic steps, legal constraints, audit supervision, etc., but they are still not fully applicable to legal forensics. A general legal forensics system must have a complete forensics process to ensure the smooth progress of the forensics work. One of the purposes of legal forensics is to use legal means to bring criminals to justice. Only by ensuring the legality of the evidence can it be accurately identified case, and therefore also to ensure the legality of the evidence collection process. In order to design a more powerful legal forensics system, this paper introduces a data mining algorithm to extract valuable information from massive data through association rules to improve the efficiency of forensics. At the same time, this paper also proposes three coding schemes for the integrity of the evidence object, and compares the forensic effects of the three schemes.

The Evaluation of Strategies Based on the Analysis of Three Causes of Accounting Frauds

Accounting fraud has a long history and a wide range of harm, which has attracted wide attention in the world. Although numerous nations have put in place pertinent laws and policies to reduce the likelihood of accounting fraud, the reality shows that the desired effect has not been reached, and fraud instances are still prevalent. Moreover, the way of accounting fraud also constantly changes. This paper analyses the consequences and causes of accounting fraud through a review of the literature, focusing on the audit departments lack of adequate external oversight and the companys irrational corporate governance, which involves having one person fill two key roles. The accountants lack of business ethics is also discussed. In order to provide a reference for the prevention of accounting fraud in the future, the author evaluates some detection methods for accounting fraud and discovers that while adequate audit supervision and sound corporate governance are important, it appears that improving the accountants own business ethics matter more in the future.

Research on Collaborative Supervision of Internal Audit and Discipline Inspection Compliance in State Owned Enterprises

China's state-owned assets rank among the top in terms of scale and proportion in the world. Specifically, this article takes Company A, a provincial-level subsidiary of Z state-owned financial enterprise, as the research object. Firstly, it elaborates on the research background and main research content of the supervision mechanism of state-owned financial enterprises. Based on the importance of collaborative supervision explained in the research background and significance, the research purpose is determined. By analyzing the current situation of disciplinary and compliance supervision and internal audit supervision in Z Group and its subsidiaries, the advantages and problems of various types of supervision are proposed. Then, by analyzing and designing the starting point, mechanism ideas, and overall framework of the collaborative supervision mechanism between internal audit and disciplinary and compliance, the establishment of a joint meeting mechanism for supervision work is introduced.

Accounting Information Leakage in Iron and Steel Industry

This study explores the issue of accounting information misstatement in the steel industry. As an important pillar industry of the national economy, accounting information in the steel industry plays a crucial role in driving economic development and decision-making processes. However, in practice, accounting information misstatement is common in steel enterprises, causing financial management and regulatory challenges. This paper aims to reveal the reasons and mechanisms behind accounting information misstatement in steel enterprises, examine its impact on decision-making, and propose effective countermeasures. Through empirical research on steel enterprises, this study identifies the potential risks and negative effects of accounting information misstatement on decision-making and provides recommendations for improving internal control and strengthening audit supervision. This paper provides important references and guidance for steel enterprises and enriches the theory and practice of accounting information misstatement research.

Government audit supervision and enterprise mergers and acquisitions

ABSTRACT As an important part of the national political system, government audits play a significant role in supervising and restricting enterprises. Since 2010, the National Audit Office of China has repeatedly disclosed the problems regarding enterprises’ M&A to prevent the loss of state-owned assets. This study takes listed companies controlled by the central enterprises of A-shares from 2008 to 2018 as a sample to investigate the impact of government audit supervision on M&A. We find that government audit supervision reduces the number and scale of M&As. Further research shows that government audits can reduce enterprises’ M&A premiums and affect payment methods. Finally, government audits significantly improve the short- and long-term performance of M&As. These findings show that Chinese government audits positively affect corporate governance, curbing M&As that damage enterprise interests. This study provides micro-level evidence of the governance effect of government audits on the scientific decision-making of enterprises.

A study on the key drivers of national construction project audit risk and evolvement mechanism

PurposeChina has recently introduced a new audit law that aims to increase the scope of audit supervision and raise the standards for preventing risks in auditing national public projects. This paper presents a systematic research study on the causes of audit risks in national public projects and discusses the process by which these causes contribute to the emergence of such risks. Furthermore, the paper investigates the core risk sources in various types of national construction project audit. This paper aims to provide theoretical support for auditors of national construction projects in risk avoidance when conducting audits.Design/methodology/approachIn this study, the authors carefully selected five national public audit projects from China and performed a comprehensive analysis of 85 relevant audit documentation. The textual analysis was conducted using Nvivo12 software, and the grounded theory approach was adopted for generalization purposes.FindingsBased on the research results, the findings suggest that there are five key causes contributing to the audit risk of national construction projects: professional competence, risk awareness, management capacity, level of attention and deliberate fraud. The most critical factor identified is management capability, with 59.93% of the data supporting this view. This conclusion was based on an analysis of state-owned enterprises, administrative organs and public institutions. Building upon this, a framework titled “the mechanism of audit risk factors with management capability as the core” was constructed.Originality/valueThis paper employs qualitative analysis methods to examine national construction projects in China, contributing new literature to the theoretical study of audit risk management. The article also provides practical recommendations for auditors on how to mitigate audit risks and improve the quality of audit services in national project governance.

Retracted: Ant Colony Algorithm-Based Audit Supervision to Promote the Optimization of New Infrastructure Investment Environment.

[This retracts the article DOI: 10.1155/2022/7454982.].

Accounting vs. Politics: Effects of China-US Audit Cooperation on China Concept Stocks

Abstract Since 1993, Chinese companies have entered the US capital market, becoming a crucial platform for their public listing and fundraising. However, inconsistent accounting policies between China and the US have resulted in the delisting of certain China Concepts Stocks (CCS) in the US. Nonetheless, the recent accounting review cooperation agreement between the China Securities Regulatory Commission and the US PCAOB has altered the future prospects of CCS in the US. This study aims to quantify the economic value of this bilateral collaboration using the Audit Supervision Cooperation Agreement, signed by China and the US on August 26, 2022, as a natural experiment. Our findings reveal that in the three months following the agreement, CCS with political connections and accounting issues related to the Chinese government exhibited returns of 4.63% and 1.13% respectively. We conducted robustness tests including parallel trend tests, experimental and control groups based on VIE architecture interference, and sub analysis samples and placebo tests. Additionally, trading volume and price volatility of politically affiliated companies also experienced positive effects. In conclusion, our study underscores the significant impact of the political friendship between China and the US on the economic development of both nations and the global economy. JEL classification numbers: F42, G14, G15. Keywords: Political connections, Chinese concept stock, Accounting collaboration.

Government audit supervision, financialization, and executives' excess perks: Evidence from Chinese state-owned enterprises

In recent years, the phenomenon of corporate financialization has become increasingly prevalent in China. This paper uses data from Chinese state-owned listed firms from 2006 to 2018 to investigate whether large-scale financial investments by companies facilitate executives' excess perk consumption, and whether government auditing, as an important component of the national governance system, can play a governance role in this behavior. The results show that corporate financialization behavior significantly exacerbates executives' excess perks, and government auditing can mitigate the effect of corporate financialization on executives' excess perk consumption. We find that increased cash flow is the mechanism by which financialization behavior positively affects executives' excess perks. Furthermore, this study reveals that the implicit corruption of state-owned enterprise executives through corporate financialization is primarily based on compensation psychology, which will reduce the effectiveness of monetary compensation contracts. However, government auditing can effectively constrain this influence.