Question

Define professional skepticism and discuss why it so important to the practice of auditing.

Answer 1

Professional Skepticism can be defined as an attitude that includes a questioning mind being alert to conditions indicating possible misstatements. Professional Skepticism in simple words means having a questioning and alert mind. Professional skepticism involves being alert to Fraud risk factors , Contradictory audit evidence, Reliability of documents.

Importance of Professional Skepticism in auditing

The auditor while planning and performing an audit should use his Professional Skepticism

Audit is conducted with a view form an opinion whether the financial statements prepared provides a true and fair view of affairs of the company. Auditor thus needs to have aquestioning and alert mind so that any misstatements arising due to fraud and error can be detected. Professional Skepticism reduces the risk of:

• Overlooking unusual circumstances
• Over generalising while drawing conclusions from audit observations.
• Using inappropriate assumptions in determining nature, timing and extent of audit procedures & evaluating the results thereof.