Professional Judgement and Professional Professional Judgement and Professional Scepticism

Professional Judgement and Professional Scepticism

20 The auditor shall plan and perform an audit by exercising professional judgement.

21 The auditor shall plan and perform an audit with an attitude of professional scepticism recognising that circumstances may exist that cause the financial report to be materially misstated.

22 The professional judgement of an auditor emanates from characteristics such as the auditor’s expertise, experience, knowledge and training. In exercising professional judgement when conducting an audit of a financial report, the auditor considers a number of factors which may influence the auditor’s decision on the planning, performance and reporting aspects of the audit. Such factors may include audit objectives, the nature of the subject matter(s) subject to audit, expectations, practicality, sufficiency and appropriateness of audit evidence, reliability of information and alternative audit tools and techniques. When exercising professional judgement, the auditor maintains independence and objectivity, and adopts an attitude of professional scepticism in order to achieve the audit objectives.

23 An attitude of professional scepticism means the auditor makes a critical assessment, with a questioning mind, of the validity of audit evidence obtained and is alert to audit evidence that contradicts or brings into question the reliability of documents and responses to enquiries and other information obtained from management and those charged with governance. For example, an attitude of professional scepticism is necessary throughout the audit process for the auditor to reduce the risk of overlooking unusual circumstances, of over generalising when drawing conclusions from audit observations, and of using faulty assumptions in determining the nature, timing and extent of the audit procedures and evaluating the results thereof. When making enquiries and performing other audit procedures, the auditor is not satisfied with less-than-persuasive audit evidence based on a belief that management and those charged with governance are honest and have integrity. Accordingly, representations from management and those charged with governance are not a substitute for obtaining sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.