Audit Failures In Small and Medium Sized Accounting Firms Under China’s Revised Securities Law
DOI:
https://doi.org/10.62051/3gj63219Keywords:
New Securities Law; Filing system; Audit failure; Audit collusion.Abstract
After China’s new Securities Law shifted securities related audit entry from an approval to a filing regime, small and medium sized accounting firms gained easier market access, but audit quality risks increased. Drawing on information asymmetry and audit collusion theories, this study uses a case analysis of Zhongtian Huamao’s audit of ST Wangli to reconstruct the failure process and identify key deficiencies, including impaired independence, inadequate procedures and evidence for fixed assets, insufficient follow up on prior qualified opinion issues, and false statements in audit documents. The findings suggest that greater scope for collusion under the filing system, together with insufficient due diligence and professional competence, contributed to the failure. Policy implications include strengthening auditor ethics and firm independence, improving capability building, and moving toward more preventive and continuous regulatory oversight.
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