Assignment of Auditing

A professional judgment is a key factor in auditing. As a result of development of auditing and accounting industry, especially after a series of accounting fraud and auditing failure cases, such as Enron and Arthur Andersen, in the last decade, professional judgments is becoming a more and more important aspect for the independent auditing industry. Recently, many countries and professional bad issued more strict auditing standards to emphasize to this point. It means the auditor should be required to take broader processes and consider more types of information when he/she doing auditing job. The auditor must be more careful when he/she using professional judgments to identify the risks of material misstatements. At the same time, auditors should take appropriate auditing skills and processes to minimize above potential risk. Professional judgment directly affects auditors to collect of information and to make the auditing conclusions. In short words, professional judgment must be cautious, adjective and of integrity. It focuses on the fair statement of an accounting entity 's business activities.

Normally, the business judgments rule requires the management of an enterprise must act in the best interest of its company. It means the management must implement their fiduciary duties, such as faith, integrity and duty or care. In other words, the management has a duty to maximize the value of their enterprise. If their behavior observes their duty and company 's interest, it protects the management from their decision-making even if there is a loss or bad result. It is clear that the business judgments focus on the interest of shareholders and it emphasize lawful and reasonable behavior of the management of an enterprise.

However, because of different natures between above two judgments view, it may cause conflict on financial statement of an accounting entity.

As to the mention above, under the different base of view, management and auditors intend to