What is professional skepticism and why is it important to the auditor?
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. This critical assessment is necessary in order for the auditor to draw appropriate conclusions.
What are the qualities of professional skepticism?
The professional standards define professional skepticism as “an attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.” Given this definition, one quickly realizes that professional skepticism can’ …
Which is an example of professional skepticism?
Examples of professional skepticism include: considering what can go wrong during the audit, performing audit procedures to obtain sufficient appropriate evidence rather than merely obtaining the readily available evidence to corroborate management’s assertions and critically evaluating all findings, regardless of …
How does the Pcaob define professional skepticism?
PCAOB standards define professional skepticism as an attitude that includes a questioning mind and a critical assessment of audit evidence, and it is essential to the performance of effective audits under Board standards. Baumann, PCAOB Chief Auditor and Director of Professional Standards.
How do you demonstrate professional skepticism?
Professional scepticism includes being alert to, for example:
- Audit evidence that contradicts other audit evidence obtained.
- Information that brings into question the reliability of documents and responses to inquiries to be used as audit evidence.
- Conditions that may indicate possible fraud.
How do you practice professional skepticism?
Exercising professional scepticism throughout the engagement. Professional scepticism needs to be exercised throughout the engagement but may not always be top of mind. To promote this mindset, frequent stand-back reviews during all phases of the engagement by all members of the engagement team are suggested.
What is the meaning of professional skepticism?
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.
Can professional skepticism be learned evidence from China?
A questionnaire was administered to students enrolled either in the accounting program or in the business administration program of a large college in China. The author also finds that accounting and nonaccounting business students exhibit no significant difference in their scores of professional skepticism.
What is the importance of skepticism in human life?
The adoption of healthy skepticism will result in a more informed public, more informed decision making about claims and treatments, and have the overall effect of the promotion of truth and validity to protect us from extraordinary claims that have little reason to be believed.
At what stage is professional skepticism necessary?
When performing risk assessment procedures – an auditor should be sceptical when performing risk assessment procedures at the planning stage of the audit.
What is professional skepticism in the context of an audit?
But what is professional skepticism in the context of an audit? In layman’s terms it is a mindset where an auditor does not simply accept information or audit evidence at face value. Rather, the auditor applies a reasonably questioning attitude while performing the audit.
Can a PCAOB inspection indicate a lack of professional skepticism?
The Practice Alert notes that PCAOB inspections continue to identify circumstance s that suggest auditors did not appropriately apply professional skepticism in conducting the audit.
What does the practice alert for AICPA mean?
The Practice Alert covers the appropriate application of professional skepticism in conducting audits and related considerations for audit firms’ quality control systems.
Who is the Chief Auditor of the AICPA?
The proposed SAS, if finalized in its proposed form, will hopefully further enhance audit quality and address concerns of professional skepticism. Bob Dohrer, CPA is Chief Auditor at the AICPA.