In: Accounting
Explain Professional Scepticism and It’s benefit to the Auditor? ( 10 Marks)
Defining professional skepticism involves an attitude that
involves a questioning mind, and includes caution against
situations that could lead to misunderstandings due to error or
fraud and include a critical evaluation of the audit evidence. It’s
a skill which is developed over a time and cannot be cultivated
overnight which should constantly build and refine.
The auditor shall plan and perform audit with
Professional scepticism recognising the circumstances may exist
that occur material misstatements in finalisation of financial
statements. Thus the auditors have to remain alert regardless of
the fact that the clients internal audit as well as control system
pertaining in the client organisation.
Audios shall always be alert on the material
misstatement as they could also be due to frauds in the
organisation.
Professional scepticism includes alerts on,
• Information’s that brings question on reliability of
a fact/ document which acts as an audit evidence.
• Audit evidence that contradicts other evidence.
• Situations that may indicate possible fraud.
• Other conditions that the auditor found to be
necessary to do so.
Auditor shall apply Professional scepticism in various stages
such as auditor’s opinion and evaluation of overall fairness of
underlying transactions and events.
Benefits of Professional scepticism to Auditors
• Accuracy
• Completeness of audit
• Authenticity of work done
• Less risk of bias
• Avoiding inappropriate assumptions
• Identify unusual events of circumstances etc