Question

In: Accounting

What are the key considerations when formulating a definition of professional skepticism?

What are the key considerations when formulating a definition of professional skepticism?

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Expert Solution

An auditor is said to have professional skepticism if he has a questioning mind, being alert to conditions which may indicate possible misstatement due to fraud or error , and critical assessment of audit evidence.

Professional skepticism is an important quality that any auditor should have. The key consideration when formulating a definition of professional skepticism are:

1. Critical assessment of audit evidence.

2. Overlooking unusual circumstances.

3. Circumstances that suggests the need for audit procedures in addition to those required by SAs.

4. Ability to deal with audit evidence that contradicts other audit evidence obtained.

5. Interpersonal understanding and suspension of judgement.

6. Examining of variances and sensitivity analysis.

Some of these procedures require more robust procedures than mere inquiry, inspection or other audit procedures. Arriving at an appropriate audit opinion sometimes require the application of professional skepticism and behavior.

A belief that management and those charged with governance are honest and integrity does not relieve the auditor of the need to maintain professional skepticism.


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