Question

In: Accounting

Consider the importance of documenting the rationale for your final conclusion. Why do you think it...

Consider the importance of documenting the rationale for your final conclusion. Why do you think it is important to document your rationale when finalizing your judgment? In addition, describe what is expected to be documented to support an auditor’s professional judgment.

Solutions

Expert Solution

Auditors are responsible for commenting on the true and fair view of financial statements. Whenever there is a discrepancy from the generally accepted accounting standards the auditor has to bring it to limelight through his report.

The audit report consists of the summary of the entity's financial consistence. The auditor before coming to conclusion on any of the deficiencies found in entity's activities he should obtain reasonable evidences for the same beacuse auditor is bound by law not to give any opinion based on any personal relationship. He should document all the important documents depending on which he arrived at a final conclusion.

Audit is mostly conducted on a subjective basis and it requires the auditor to possess professional judgement and skepticism.

Professional Judgement is used in various stages of audit such as:

1. Selection of sample

2. Identifying the audit risk based on his understanding of entity's business model.

3. Evaluating whether sufficient evidence is obtianed.

These judgements should be based on rationality and not dependence.

Whenever auditor is under the eyes of law or when he is subject to peer review the burden of proof lies with him to prove his declarations on entity's performance.

So it is necessary for an auditor to document all the required documents that assisted the auditor to arrive at his final conclusion.

Expected documents to support an auditor's professional judgement.

1. Evidences obtained either from entity's personnel or external parties.

2. Written representations from those charged with governance.

3. Procedures performed by the team of auditor.

4. Replies given by the management at the time of conducting audit.


Related Solutions

Given the rationale for why firms provide benefits, why do you think firms seldom provide personal...
Given the rationale for why firms provide benefits, why do you think firms seldom provide personal auto insurance to employees as an employee benefit?
Describe the importance of the Enterprise Valuation measure? Do you think it is useful? Why or...
Describe the importance of the Enterprise Valuation measure? Do you think it is useful? Why or why not?
What is the rationale for subsidizing higher education in LDCS? Do you think that it is...
What is the rationale for subsidizing higher education in LDCS? Do you think that it is a legitimate rationale from an economic point of view? Explain in detail
What is the influence of colonialism in determining the Indian business rationale? Do you think that...
What is the influence of colonialism in determining the Indian business rationale? Do you think that post-independence developments altered the rationale?
what do you think is the rationale for earnings based valuation? Advantages and concerns?
what do you think is the rationale for earnings based valuation? Advantages and concerns?
Why is it essential that unresolved issues are brought to a final conclusion? Explain what is...
Why is it essential that unresolved issues are brought to a final conclusion? Explain what is meant by following up unresolved issues. Why is it sometimes necessary for a person external to the team to be brought in to resolve issues? List three circumstances when this might be a good idea.
"How vulnerable do you think your health is to environmental stressors? Do you think that your...
"How vulnerable do you think your health is to environmental stressors? Do you think that your physical response to stress has anything to do with your age? Your genes? Your personality? Your daily behaviors? Explain."
Do you believe language meaning is innate? Explain your rationale
Do you believe language meaning is innate? Explain your rationale
Consider your own gender. What do you think it means to be that gender in our...
Consider your own gender. What do you think it means to be that gender in our society? How did you learn how a man or women should act in our society, or what they should do or be? While you were growing up did you ever feel conflicted about how you thought you should act as a male or a female and how you wanted to act (or what you should do or be)? Please share some of your own...
Why do you think researchers use samples? Why do you think we also use null and...
Why do you think researchers use samples? Why do you think we also use null and alternative (research) hypotheses?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT