Research on Audit Risks and Corresponding Mitigation Strategies in the Sales and Collection Cycle of Company Y

Abstract

The pharmaceutical manufacturing industry has experienced rapid growth in output value over the past decade, becoming a significant component of the national economy. Despite numerous regulatory policies, many pharmaceutical companies have been penalized by regulatory bodies, with a substantial number of cases involving fraud or financial misstatement in the sales and collection cycle. This paper addresses this issue by examining the case of Company Y to investigate two key questions: the significant risk points in the sales and collection cycle of pharmaceutical manufacturers, and the corresponding audit risk response measures for this cycle within the industry. Current research focusing on the audit of pharmaceutical manufacturing, particularly at the level of the sales and collection cycle, is limited. Therefore, this paper centers on the sales and collection cycle, integrating theory with case study based on the audit risk model. By analyzing risk factors related to both the risk of material misstatement and detection risk in Company Y's sales and collection cycle, it summarizes response measures for audit risks in this business segment of the industry. Through statistical description of penalty cases in the pharmaceutical manufacturing industry and a specific analysis of the Company Y case, this paper aims to provide empirical data and guidance for auditors conducting audits in this area.