Question

1. Explain that auditor’s public interest responsibility including the source of their responsibility they extends to which they embrace this responsibility & tangible ways that entry-level auditors can embrace this responsibility?

2. Explain the concept of professional skepticism including its underlying attributes and in addition to describing the different approaches to professional skepticism and how they are used in audit?

3. Applied question(use example):1. Use of example of testing revenue explain the steps and performance of standard analytical produces 2. Using the example of testing sales, returns and allowances explain the process of testing accountants

4. Although auditors are required to exercise professional judgment they are human and thus prune to a number of judgment traps, bias, Explain at least three of the typical judgement traps

Answer 1

1) The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.  Because of the nature of audit evidence and the characteristics of fraud, the auditor is able to obtain reasonable, but not absolute, assurance that material misstatements are detected. The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not material to the financial statements are detected. [Paragraph added, effective for audits of financial statements for periods ending on or after December 15, 1997, by Statement on Auditing Standards No. 82.]

2) When assessing engagement acceptance – at this stage the auditor should consider whether the management of the intended audit client acts with integrity and whether there are any matters that may impact on the auditor being able to act with professional scepticism if they accept the engagement, such as ethical threats to objectivity.

When performing risk assessment procedures – an auditor should be sceptical when performing risk assessment procedures at the planning stage of the audit. For example, when discussing the results of analytical procedures with management, the auditor should not accept management’s explanations at face value, and should obtain corroboratory evidence for the explanations offered.

When evaluating evidence – the auditor should critically assess audit evidence and be alert for contradictory evidence that may undermine the sufficiency and appropriateness of evidence obtained.