Discussion The Professional Judgment Of Material Misstatement Risks' Evaluation

Professional Judgment of Auditing, running through the entire auditing process, is characteristic of subjectivity. So it is not only subject to the objective factors, such as quality of collected information, but also to the subjective factors, such as auditors' knowledge, experience, and preferences. In the evaluation of material misstatement risk, the failure of judgment on specific issues may make entirely the opposite findings towards the actual situation. Appropriate professional judgment can ensure auditing quality, improve work efficiency, reduce audit costs.But inaccurate judgments will increase auditing risk, and even lead to the failure of evaluation of material misstatement risks.The paper analyzes the meaning, causes, characters, principles of professional judgment in risks of material misstatement.The relationship between judgment and risk is also analyzed in the paper, and so are the judgment methods in evaluation of risks of material misstatement.The decision process and application procedure are analyzed, and raising methods to increase judgment capacity from both objective side and subjective sides. The paper includes four parts:The first part focuses on the meaning, characters and principles of professional judgment in risks of material misstatement.According to analyze economic environment, accounting rules and accounting understanding, the paper points out the importance of judgment in the evaluation.The second part focuses on judgment methods in evaluation, including intuitive judgment method, comparative judgment method, reasoning judgment method, intelligence judgment method, expert judgment method and probability judgment method.And meaning and premise of various methods is analyzed in the paper. Also supportive methods are listed in the paper to help make precise judgment.The third part focuses on decision-making process and influencing factors of auditing professional judgment.The decision-making follows such process:determine the problems and objectives, confirm standards and weights, collect relevant information, put forward and evaluate possible options, and finally determine the solution to form judgment. The factors influence judgment includes internal factors, such as auditors ethics, mind and knowledge, and external factors, such as economic, legal and enterprises.The fourth part summarizes the measures to improve the capacity of professional judgment.On the basis of professional judgment theories, the paper intends to confirm the importance of judgment in the evaluation. Through analysis of the influencing factors, and right application of various methods, mode and procedure, risk factors can be rightly assessed. So inappropriate auditing can be avoided, and auditing risk can be reduced.