Bounded Rationality And Audit Quality

Accounting measurement is trendence towards fair value by historical cost, guided by The Measurement Perspective of Value-Relevance, authoritative viewpoint of financial accounting objective. Valuation become the most cutting-edge problem of financial accounting, Including more and more estimates of the future in today's financial statements. Audit is reconfirm to accounting recognition, judgement to firm administering authority behavior, and judgement to CPA's behavior, is the last and the most important barriers of financial information gets into capital market. Although audit is a profession depending on sufficient demand of capital market, although now there are a vast amount of criterion and norms to audit, and although all government supervision institutions and International Organizations have great expectations on audit, but the fact is that audit don't play fully due functions. Particularly the fact of financial crisis of 2008 exposed that auditors didnot disclose adequately the defectives of companies'risk control, mispricing, and misleading information is clear proof. And auditing rational expectation gap is increase constantly because mainly CPA's judgment bias resulting from low professional competence, not audit fraud from adverse motivates. our country's fair value measurement of 2007 is compulsory change of measurement mode. Thus research on CPA's capability, especially the capability in professional judgment and their behavioral rules are urgent requirements.Audit is the combination of the process and the result, also is the combination of behavior and technology, but technology can standardization while behavior not, so influencing factors of audit quality mainly is auditing behavior, In other words, is a choice and integrated apply on auditing prodecure, method and technology. Based on literature review and theories analysis related, this paper begin to discuss from reconfirm to accounting recognition, judgement to firm administering authority behavior, and judgement to CPA's behavior, centered on the process and the result of auditing fair value, especially the process。in the process of discussion, I find general financial accounting objective, also is general audit goal and judgement norms audit quality is irrational and delphic, so I discuss them. Although bounded rationality of audit judgement is embodied in audit process, but can be comprehensive reflected in audit result. At the last of this paper I verify theories analysis by two empirical tests.This paper find, audit fair value involves matters most of structure uncertainty, not parameter uncertainty, so audit failure mainly bcause CPA's judgment bias resulting from low professional competence by complex circumstances and people bounded cognitive and computing abilities, not audit fraud from adverse motivates by people' opportunism。Risk-oriented Auditing is the most favorable audit mode in auditing fair value, but today the evaluation of business risk have much deficiency, neglecting the character's change of firm business risk is one because of using derivatives. Therefore it is necessary to reacquainte the concepts, for example, risk, materiality, risks of material misstatement, financial report objective, independence, and should pay much attention to the rules of audit behavior. The empirical tests of this paper find that it is different significantly between auditing fair value and auditing historical cost, and external environment'change, such as CSRC's financial penalty, may not effective to the improvement of audit quality. Hence This paper think that construction of CPA's capability is a fundamental way, this capability includes individual competence of CPA and total capability of accounting firm.