Research On CPA’s Professional Judgment Based On The Financial Fraud Of Tianfon Energy-saving

As a result of economic transformation, the economic structure is adjusted and upgraded, the market transaction pattern and supervision mode are innovated, and the new accounting elements, economic phenomena and corporate governance forms appear accordingly; these changes have posed new challenges to certified public accounts in professional judgment.Therefore, it’s a new task to promote professional judgment and carry out further researches on professional judgment. On October 13, 2014, the CPA industry exchange seminar with the theme of “Professional Spirit and Professional Judgment” was held in Macau; subsequently, the Chinese Institute of Certified Public Accountants issued the Guidelines for the Professional Judgment of Certified Public Accountants formally on March26, 2015, advocating that the CPA should focus on and improve professional judgment proficiency.From the perspective of CPA audit, the paper firstly analyzes the information of professional judgment in non-standard audit opinions,fraudulent cases involving listing companies and punishment cases involving certified public accounts in China from 2006 to 2014, uncovers the reasons why the certified public accountants are exposed and punished due to professional misjudgment, classifies and sorts out the reasons and gains a detailed knowledge of the application status of CPA professional judgment in China. Secondly, by means of case analysis, the paper delves into the IPO audit failure of Henan Tianfon Energy-saving Panel Science and Technology Co., Ltd.(hereinafter referred to as “Tianfon Energy-saving”) which was investigated and punished by China Securities Regulatory Commission; it probes into the reasons for the Company’s financial fraud and audit failure, analyzes how professional judgment affects the quality of the enterprise’s accounting information, clarifies the accounting and audit responsibilities for the audit failure and points out the CPA’s misjudgment and violations of the relating standards in implementing audit work for Tianfon Energy-saving. Finally, based on the CPA’s professional judgment problems in this case, the strategies for enhancing the reasonable application of professional judgment for Chinese CPA are proposed from five perspective, aiming to enable the CPA and auditor toobtain a clearer understanding of the professional judgment in specific business operations, grasp the essence of professional judgment and make correct use of principles in conducting business.Through the research, it’s argued that strengthening regulatory efforts is conducive to enhancing the CPA’s prudence in professional judgment.However, the written records on audit issues are deficient and the defend ability is comparatively weak since the Chinese CPA is incompetent for making precise judgment as well as coherent and stable decisions. The CPA of Tianfon Energy-saving failed to follow the audit and accounting standards and carry out comprehensive audit with professional prudence and dubiety, thus resulting in professional misjudgment and audit failure.Therefore, to make a correct and reasonable use of professional judgment is the premise to ensure audit quality and it’s imperative to improve professional judgment proficiency. The paper probes into the application status of professional judgment and the CPA’s professional judgment in the financial fraud of Tianfon Energy-saving, aiming to enlighten the CPA on making correct use of professional judgment in audit process.