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In: Accounting

Professional scepticism has received much attention from policy makers, regulators, politicians and the public. After nearly...


Professional scepticism has received much attention from policy makers, regulators, politicians and the public. After nearly a decade of action, audit quality has undoubtedly improved even though calls for more professional scepticism have not abated.
Required:

(a) Discuss two (2) audit circumstances when professional scepticism is necessary.


b) Propose two (2) ways that can be used to enhance auditors’ professional scepticism.


c) Discuss one (1) positive and one (1) negative effect of professional scepticism.

Solutions

Expert Solution

Professional skeptisim(ps) is an attitude that includes a questioning mind being alert to conditions which may indicate possible misstatemnt due to error or fraud and a critical assessment of audit evidence.
a). Audit evidence that contradicts other audit evidence obtained.
Conditions that may indicate possible fraud.
To reduce the risk of over generalising when drawing conclusions from audit observations
Information that brings into question that reliability of documents and responses to inquiries to be used in qudit evidence.
b) Ps enhances the likelihood the auditor will understand your industry ,lines od business,business processes, and any nuances that make company different from others,as it naturally causes the auditor to ask questions that may otherwise go unasked.Thses questions not only help the auditor apply standards,but alsohelps to gain deeper knowledge of the business.
Subjectivity and judgement are more prevalent than ever ,given the migration towards more principles based accounting and increase use of fair values in financial reporting.
c) Negative-presumptive doubt associated with person capable to do job and organisational trust which in turnlead to higher turnover intentions
Positive-Ps impacts the quality of their audit services and to obtain sufficient appropriate evidence which is not easily attainable evidence.(questioning mind)

ekkarill92 answered 2 years ago
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