A Study Of Principles?Differences In Judgment And Audit Failure

Since the establishment of the Chinese security market,there have been various cases of audit failure every year.According to the author's data,with the increasingly strict regulation of the China Securities Regulatory Commission(CSRC),the number of audit failure is on the rise,which indicates that there is still a lot of space for the research of this problem.At the same time,the economy in China is developing rapidly with new forms of transactions and business models,which brings more challenges to the professional judgment of accountants,auditors,and other practitioners.From the CSRC penalty notice,it can be found that the reason why the audit failure happened is that the certified public accountants did not follow the principles during the audit.Since the CSRC take the principles and professional judgment as a criterion,which means the study from the perspective of this is of practical significance.This paper adopts the methods of literature review,descriptive statistics and case study to research audit failure.Initially,the concepts of principles,professional judgment,and audit failure are introduced in the theoretical part of the paper,and the relationships among them are described.It is believed that the guidance of the set of the principles will affect the auditor's professional judgment.The principleguided standard leaves a larger space while the standard-guided one leaves less.In practical work,personal judgment differences will happen for the guidance of the standard or the lack of skill.When the CSRC consider the difference is out of the range of the principles from the perspective of users,they will fail the audit and punish the company.Secondly,analyzing the relationship between the performing of principles in the accounting and audit and audit failure of 42 administrative penalty notice from the CSRC between 2008 and 2018,the research finds that the direct cause is the difference in performing principles in the audit.The indirect cause is that the accounting has different personal judgment and the set of orientation in principle.Based on this,the paper chooses the failure of the Deng Yun Shares using specific rules of accounting standards and audit standards.It is believed that there are three main factors leading to the failure of Shine Wing.Initially,the reason is the difference in professional judgment between the accounting of Deng Yun Shares;Secondly,the reason is the differences in professional judgment between the audits of Shine Wing;Finally,the ambiguity of the standards leads to the disputes between CSRC and auditors on the definition of some concepts.Finally,the paper puts forward some suggestion on how to prevent audit failure.The main contribution of this article reflects in two aspects: First,compared with other studies,they have not considered from the system of the audit.The paper from the perspective of principles and professional judgment will make the conclusion more reliable and persuasive.Second,there are few studies on the relationship between principles,professional judgment,and audit failure.This paper explains them as the theoretical basis,which offers a new perspective to understand and prevent audit failure.