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What Is Professional Skeptiscm

What is professional skeptiscm

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18 views

What Is Professional Skeptiscm

What is professional skeptiscm

Uploaded by

joyfulmaeka
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Professional skepticism is a foundation of the auditing profession that we need

to maintain and evolve to support the audit of the future. Professional skepticism has
always been used to validate information through probing questions, critical assessment of
evidence, and attention to red flags and inconsistencies.
Applying an appropriate level of professional skepticism enhances the likelihood
the auditor will understand your industry, lines of business, business processes, and any
variations that make a company different from others, as it naturally causes the auditor to ask
questions that may otherwise go unasked.
Professional skepticism therefore is an essential attitude that enhances the auditor's ability
to identify and respond to conditions that may indicate possible misstatement. It includes a
critical assessment of audit evidence. ... This critical assessment is necessary in order for
the auditor to draw appropriate conclusions.

Contradictory evidence: Indicates that a financial statement amount or disclosure is


incorrect. Or, is inconsistent with other audit evidence obtained.
When auditors are faced with contradictory evidence, they need to evaluate how that
evidence may affect the financial statements and the conduct of the audit.
Auditors have a responsibility to remain alert to audit evidence that contradicts other audit
evidence obtained. The application of professional skepticism is essential to the critical
assessment and questioning of contradictory audit evidence. When the auditor obtains
information during the course of the audit that contradicts information obtained from another
source, the auditor has a responsibility to resolve the matter and consider its impact on the
sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other
aspects of the audit.

International Financial Reporting Standards,


International Financial Reporting Standards for Small and Medium-Sized Entities
Generally Recognised Accounting Practice

The auditor should obtain sufficient and appropriate evidence which enables
the auditor to arrive at a conclusion and supports his opinion. ... Appropriateness
of evidence is the quality of the evidence, i.e., its relevance and reliability to support
the auditor's opinion. Sufficiency is ow much of the
nature, timing, and extent are responsive to the assessed risks of material.

Essentials of good audit evidence

1. Sufficient: Sufficiency is the measure of quantity. Audit evidence is sufficient when they
are available in adequate quantity. An auditor applies different audit procedures to obtain
sufficient audit evidence like test checking.
2. Reliable: Evidence obtained by the auditor is persuasive rather than conclusive. We
cannot consider such evidence 100% reliable for forming an opinion. Reliability of audit
evidence depends on its source and nature of such evidence.

3. Source: Audit evidence obtained within the enterprise is known as the internal source.
Evidence obtained from an outside enterprise like confirmation from the third party is
known as the external source. We consider the external source to be more reliable.

4. Nature: Can be documentary (like bills, vouchers), visual (like the physical verification
of fixed assets), or oral (confirmation from employees)

5. Relevant: Whether the audit evidence obtained by the auditor is relevant or not depends
on the purpose of audit procedures.

There are some thumb rules which helps in identifying the appropriateness of evidence

1. Written (documentary) evidence is better than testimonial evidence.

2. Evidence from external sources is more reliable.

3. Original documents are preferable over their photocopies.

4. The auditor should have a good understanding of internal control of the organization as it
enables him to obtain relevant evidence.

5. Evidence obtained by auditor through direct observation, inspection, physical verification,


and computations are better than the evidence obtained indirectly.

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