During which stages of the audit are auditors required to exhibit professional skepticism?
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2.56 Professional Skepticism . An important principle for auditors is the need to maintain an appropriatelevel of professional skepticism.Required: Show
Get answer to your question and much more c. How does each of the following independent issues potentially relate to the principle of professionalskepticism? Get answer to your question and much more Professional skepticism is crucial to your duty of care as an auditor. This concept includes skepticism in the usual sense, an inquiring mind, and a critical eye towards audit evidence. Acting with proper skepticism allows you to diligently audit in good faith, with integrity, based on objective facts. The importance of proper skepticism in auditing has been an integral topic of discussion over the last two decades. Many
public scandals have raised questions about whether auditors and inspectors have been sufficiently skeptical in their work. Some examples were Enron, WorldCom, many of the dealings that caused the 2008 financial collapse, Mitsubishi Materials, Wells Fargo, and Volkswagen. Regulators and the general public have become increasingly concerned about the auditing oversights that led to these kinds of financial disasters. Professional skepticism makes a significant impact on audit quality. It
has three elements: The knowledge, skill, and overall ability of the auditor. You must possess the proper knowledge and skills to perform reliable audits. The integrity and good faith of the auditor. You should not assume honesty or dishonesty, merely recognize that fraud, misstatement, and misrepresentation of essential facts can happen. This element refers to the importance of performing a robust risk
assessment, planning the engagement based on the risks involved, ensuring rigorous engagement supervision, and the diligent gathering and evaluation of audit evidence. You can work with proper skepticism by using robust procedures such as careful corroboration of documents, mathematical analysis, observation, and recalculation. Apply objectivity to selecting audit procedures, choosing sampling (or 100% testing) methodology, evaluating results, formulating conclusions, and conducting audit
work. Tasks that allow for heightened skepticism include:
It’s essential to be rigorous. You must choose procedures and conduct testing commensurate with the related risks and key controls instead of on evidence that is easier to obtain. Focus on the more relevant and reliable evidence, getting enough of it (i.e., sufficiency), and using corroborating information rather than overemphasizing the confirming evidence. Fostering a positive relationship with clients, while necessary, must not affect the audit. Audits can be compromised by a fear of conflicts with management, a desire for high post-audit satisfaction ratings, or a desire to maintain long-term clients. Deadlines and the desire to keep audit costs low can also hurt the quality of the audit. A proper audit should be free to challenge management representations. The cornerstone of professional skepticism is verifying information objectively and from multiple sources. Mistakes or mischaracterizations can be made at any number of steps in the process, so you must ascertain numbers independently. As an internal auditor, you must remain vigilant. If you keep these ideas in mind, audits can prevent the financial and legal fallout of that unchecked errors and malfeasance cause. Do your best to ensure that neither time nor cost constraints, familiarity with the client, nor the desired outcome damage your standard of professional care. Internal Audit IT Audit Professional ProgramsBecome proficient in the field of IT Audit, Internal Audit, and Information Security. Our Programs have been helping professionals around the world to gain the vital skills, confidence, and credibility they need to succeed in specialized roles in their respective disciplines. The programs are an objective, measurable way to demonstrate professional competence and validate your professional standing. Why is an auditor required to use professional skepticism?The need for professional skepticism in an audit cannot be overemphasized. Professional skepticism 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.
What are the 4 phases of an audit process?Although every audit process is unique, the audit process is similar for most engagements and normally consists of four stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit Report and Follow-up Review.
What is professional skepticism in auditing?What is professional scepticism? To show professional scepticism means: having a questioning mind. being alert to anything that may indicate misstatement due to error or fraud. critically assessing audit evidence.
How do auditors develop professional skepticism?Application of Good Judgment Process: An important way to improve professional skepticism in individual auditors is to accelerate their ability to exercise sound judgment by following a good judgment process and learning to avoid judgment traps and biases.
At which situations will professional judgment be a necessary consideration?Professional judgment is necessary in particular regarding decisions about: Materiality and audit risk. The nature, timing and extent of audit procedures used to meet the requirements of the CASs and gather audit evidence.
Whose responsibility is it to apply professional skepticism?There is a shared responsibility for skepticism – Professional skepticism needs to be exercised by all professional accountants, not just auditors. Preparers, in particular, need to exercise skepticism themselves before handing information over to external auditors.
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