However, auditor independence is impossible due to the auditor–client structure and conscious and unconscious personal bias. The threats to auditor independence are powerful incentives that reduce professional scepticism, making it difficult to exercise professional scepticism while making professional judgement.
What is the link between audit evidence and professional Scepticism?
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.
What is professional skepticism as it relates to auditors?
Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence . ... In exercising professional skepticism, the auditor should not be satisfied with less than persuasive evidence because of a belief that management is honest.
What is independence as it relates to the auditing profession?
Auditor independence refers to the independence of the external auditor . It is characterised by integrity and requires the auditor to carry out his or her work freely and in an objective manner.
Why is professional skepticism 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’ ...
What are the characteristics of professional skepticism?
The Center for Audit Quality described six characteristics of skepticism: a questioning mind, suspension of judgment until appropriate evidence is obtained , a desire to search for knowledge and corroborate information, an understanding that people’s motivation and perceptions may lead them to provide biased or ...
What does it mean to approach an audit with six characteristics of professional skepticism?
Professional skepticism is that auditing standards require that an audit be designed to provide reasonable assurance of detecting both material errors and fraud in the financial statements .
What are the barriers to applying professional skepticism?
Impediments to Professional Skepticism
avoiding significant conflicts with management; ▪ providing an unqualified audit opinion by a deadline ; ▪ achieving high client satisfaction ratings; ▪ keeping audit costs low; ▪ building or maintaining a long-term audit engagement; or ▪ cross-selling other services.
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 .
What is the importance of auditor independence?
The auditor should be independent from the client company , so that the audit opinion will not be influenced by any relationship between them. The auditors are expected to give an unbiased and honest professional opinion on the financial statements to the shareholders.
What do you mean by auditing independence?
Auditor independence refers to the independence of the internal auditor or of the external auditor from parties that may have a financial interest in the business being audited . ... The concept requires the auditor to carry out his or her work freely and in an objective manner.
What is the main reason auditors need to be independent?
An independent auditor is typically used to avoid conflicts of interest and to ensure the integrity of performing an audit . Independent auditors are often used—or even mandated—to protect shareholders and potential investors from the occasional fraudulent or unrepresentative financial claims made by public companies.
What is the difference between due professional care and professional skepticism?
07 Due professional care requires the auditor to exercise professional skep- ticism . Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence.
What are the 3 types of audits?
There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits . External audits are commonly performed by Certified Public Accounting (CPA) firms and result in an auditor’s opinion which is included in the audit report.
How can professional skepticism be improved?
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.
