Journal of Humanities, Arts and Social Science Article Recommendation | Professional Audit Judgment: The “Key Defense” in the Verification of Financial Statements of Hong Kong-Listed Companies

“Faced with financial statements that appear complete and rigorously prepared, can auditors truly determine their reliability based solely on rules and procedures?” “As financial information becomes increasingly complex and business transactions become increasingly diverse, what ultimately determines audit quality—the standards themselves, or the professional judgment exercised by auditors at critical moments?” These questions point directly to one of the core challenges in modern financial auditing: how does professional audit judgment affect the quality of financial statement verification?

In his paper titled “The Role of Professional Audit Judgment in the Verification of Financial Statements of Hong Kong-Listed Companies,” published in the Journal of Humanities, Arts and Social Sciences, Handerson Kwan Cheong Luk—a scholar from California State University, Monterey Bay (CSUMB)—focuses on the role of professional audit judgment in the verification of financial statements for Hong Kong-listed companies, exploring the critical relationship between “rules” and “judgment” in audit work.

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Professional Audit Judgment: The “Invisible Measure” Behind Financial Statements

Financial statements may appear to be merely a collection of numbers, but behind these figures often lie complex transactions, estimates, and judgments. Does an asset face impairment risk? Is a particular accounting treatment appropriate? Does a major transaction require further verification? When dealing with financial information involving uncertainty, auditors cannot always rely on mechanical inspection procedures. Instead, they need to make judgments based on professional knowledge, audit evidence, and specific circumstances. This means that auditing is not simply about “checking numbers.” Truly high-quality auditing is more like a continuous examination of the credibility of financial information: Where does the data come from? Is the evidence sufficient? Is the judgment reasonable? Can the conclusion withstand further scrutiny? Professional audit judgment plays a crucial role throughout this process.

Hong Kong-Listed Companies: The Audit Challenge in a Complex Capital Market

As an important international financial center, Hong Kong is home to listed companies whose financial information is closely related not only to their own business operations but also to investors, regulators, and capital market participants. As business models become increasingly complex, judgment-based items in financial statements may also face more demanding audit requirements. This raises an important question: When auditors encounter complex, ambiguous, or highly judgmental financial matters, how can they avoid relying solely on subjective experience? Professional judgment does not mean “going by intuition.” On the contrary, it needs to be grounded in sufficient audit evidence, professional knowledge, professional skepticism, and systematic analysis of specific financial matters. The quality of professional audit judgment therefore serves as an important link between audit procedures and the final audit conclusion.

From “Identifying Problems” to “Explaining Problems”: The Real Challenge of Audit Quality

Traditional auditing is often perceived as simply “checking figures and verifying documents.” In reality, however, audit work is far more complex. The real challenge is often not identifying that a figure differs from expectations, but answering: Why is it different? What does this difference mean? Is the existing evidence sufficient to support the audit conclusion? This is where professional judgment truly creates value. When dealing with complex financial information, auditors need to continuously balance evidence, risks, and professional standards. Excessively lenient judgment may increase the risk associated with financial statements, while excessively cautious judgment may affect audit efficiency. Professional audit judgment is therefore essentially a dynamic balance among accuracy, risk, and professional responsibility.

As Artificial Intelligence Becomes Increasingly Powerful, Does Professional Judgment Still Matter?

This is a question worth reconsidering in the digital age. Artificial intelligence, data analytics, and automated audit tools are continuously transforming traditional audit processes. Large volumes of data can be screened rapidly, abnormal transactions can be identified more efficiently, and some repetitive tasks can be automated. But one question deserves particular attention: Machines may be able to identify anomalies, but can they truly understand the business logic behind them? Technology can help auditors process more information, but it may not completely replace auditors’ professional judgment in complex matters. Therefore, the future of auditing may not be about “technology replacing auditors,” but rather about technology expanding the capabilities of auditors, while professional judgment determines how much value these technologies can ultimately generate.

The Value of Professional Judgment: Safeguarding the Credibility of Financial Information

Financial statements are important not only because they record a company’s business operations, but also because they serve as an important information link between companies and capital markets. Auditing, in turn, plays an important role in verifying the credibility of such information. By placing professional audit judgment within the specific context of financial statement verification for Hong Kong-listed companies, the study by Handerson Kwan Cheong Luk also encourages us to reconsider a question that is often overlooked: How much of audit quality comes from standardized procedures, and how much comes from auditors’ professional judgment when dealing with complex real-world issues? Perhaps truly excellent auditing is not about mechanically completing every step, but about asking the right questions at every critical point where judgment is required and supporting the final conclusion with sufficient evidence. What capital markets need is not merely “audited figures,” but information that can be trusted. Professional audit judgment is precisely the bridge that transforms “numbers” into “credible information.” The value of auditing has never been limited to detecting errors.

True professionalism means safeguarding a trustworthy line of defense for the market in an increasingly complex information environment.

So, as artificial intelligence and automation continue to enter the field of auditing, should future auditors rely more heavily on technology, or more heavily on their own professional judgment? Do you think machines can replace audit procedures, but can they truly replace “judgment”?

The study was published in Journal of Humanities, Arts and Social Science

How to cite this paper

Handerson Kwan Cheong Luk. (2026) The Role of Professional Audit Judgment in the Verification of Financial Statements of Hong Kong-Listed Companies. Journal of Humanities, Arts and Social Science, 10(9), 1034-1038.

DOI: http://dx.doi.org/10.26855/jhass.2026.09.001

https://www.hillpublisher.com/ArticleDetails/7087