Question

3. How does PS relate to professional judgment?

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Answer 1

https://accountingweekly.com/defining-professional-judgement-and-professional-scepticism/

An audit involves performing procedures to obtain sufficient appropriate audit evidence. The auditor’s professional judgement is applied in deciding which procedures are to be performed. To be able to make appropriate judgements auditors should rely on their experience and draw on their integrity, objectivity and professional scepticism. Therefore professional scepticism can be seen as one of the corner stones of professional judgement.

In conclusion, although professional scepticism and professional judgement can be separately defined. It is often used in combination throughout the planning and performing of an audit to, among other things:

1. Identify audit risk based on the auditor’s understanding of the entity and its internal control as well as determine materiality.
2. Determine the nature, timing and extent of audit procedures to meet the requirements of the ISAs and gather audit evidence.
3. Evaluate whether sufficient appropriate audit evidence has been obtained.
4. Evaluate management’s judgements in applying the entity’s applicable financial reporting framework.
5. Draw conclusions based on the audit evidence obtained.

Therefore, every auditor should during each audit engagement ensure that every decision taken, whether deciding what to do or drawing a conclusion on procedures performed or evidence obtained, should always be taken applying both professional scepticism and professional judgement.