Causes and Reflection on the Scarcity of Adverse Audit Reports: A Case Study Based on the Change in Audit Opinion of FK Company

Adverse audit reports are relatively rare in practice, with only four such reports having appeared in China’s capital market from 1998 to 2001. In 2020, another adverse audit report emerged. Although this case was briefly reported in The Chinese Certified Public Accountant, it was ultimately changed to a disclaimer of opinion due to error corrections made by the listed company. This phenomenon indicates that the adverse audit report has increasingly become “exist in name only” in practical application. Against the backdrop of this event, this study reviews relevant literature and institutional context, and examines the development practices of FK company. It outlines the frequent changes of FK’s accounting firms in recent years, the execution of 2019 audit, and the reasons for the modification of the audit opinion. The analysis focuses on the definition and judgment of key concepts such as misstatement, materiality and pervasiveness, aiming to stimulate deeper reflection among market participants on the objectivity and fairness of audit opinions.