Theory of measurement is presented which is based on the statistical interpretation of quantum mechanics. The reduction of wave packet is ascribed to undue comparison of the state of an ensemble before measurement and the state of an individual system after measurement. By studying the evolution of statistical operators for subsystems and composite systems comprising an object, a measuring apparatus and an observer, one can definitely locate where the measurement is done, thus negating the principle of psycho-physical parallelism due to von Neumann. Time needed for measurement is also discussed. The Einstein-Podolsky-Rosen state is described as an eigenstate of correlation. The argument lends support to the standpoint that the physical state of a system is to be represented by the statistical operator, not by the wave function, in the conceptual foundation of quantum mechanics.