Abstract: The process mechanism between opportunity earning management and audit risk premium with different audit skepticism is analyzed in this paper under asymmetry litigation risk environment, 2006-2009 data on A-stock companies listed on SZ and SH Stock Exchange is selected, and information dynamics game model is completed. The results disclose that audit risk premium created from positive earning management is more than that from negative earning management, the relationship between earning management and audit risk premium follows left-skew U shape curve under high or low degree of audit skepticism, but for medium audit skepticism displays square curve and to be determined with audit skepticism of identifying earning management nature and extent. In addition, audit risk premium effects resulting from a client's propensity to manage earnings upward are magnified for clients within greater litigation risk environments as identified by high-growth clients, which relates to audit skepticism and earning management nature. These indicate that it is important for auditors to consider litigation risk asymmetry and keep modest professional skepticism under modern risk-directive audit principle.

Key words: earning management, litigation risk, audit skepticism, audit risk premium