Auditors are required to plan and perform an audit with professional scepticism, to exercise professional judgement and to comply with ethical standards.
Required:
Explain what is meant by ‘professional scepticism’ and why it is so important that the auditor maintains professional scepticism throughout the audit. (5 marks)
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Professional scepticism is an attitude that includes having a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and subjecting audit evidence to a critical assessment rather than just taking it at face value.
It is important that professional scepticism is maintained throughout the audit to reduce the risks of overlooking unusual transactions, of over generalising when drawing conclusions and of using inappropriate assumptions in determining the nature, timing and extent of audit procedures and evaluating the results of them.
Professional scepticism is necessary to the critical assessment of audit evidence. This includes questioning contradictory audit evidence and the reliability of documents and responses from management and those charged with governance.