TITLE:
Proposed Analytical Framework to Assess Audit Risks
AUTHORS:
Wenmin Luo
KEYWORDS:
Small-And Medium-Sized CPA Firms, Audit Risk, Audit-Oriented Approach, Analytical Framework
JOURNAL NAME:
Open Journal of Accounting,
Vol.10 No.2,
April
27,
2021
ABSTRACT: The risk-oriented audit approach has been being applied in China since 2006 when Chinese Certified Public Accountants Auditing Standards (CCPAAS) was issued by the Chinese Institute of Certified Public Accountants (CICPA). However, most small-and medium-sized CPA firms in China still have difficulty in assessing the audit risk in accordance with CCPAAS with efficient and effective analysis and analytical procedures. Also, there are few studies introducing how to apply analysis and the analytical procedures with the risk-oriented audit approach as it requires external assistance and complex computer procedures. Therefore, this study aims to establish an analytical framework on how to apply analysis and the analytical procedures efficiently and effectively for small-and medium-sized CPA firms in China. It is based on DuPont model assessing the rationality of indicators, which is familiar to the financial officers and auditors. It proves that such an analytical framework is simple to perform since it can easily combine the information based on strategic analysis, business analysis and the analysis of financial statement from personalized audit and audit staffs at all levels can work with it. Under the premise of ensuring the quality of audit, this analytical framework can improve audit efficiency and reduce audit costs that most small-and medium-sized CPA firms need badly when facing challenges.