1. What does "professional skepticism" mean 2. Why does the internal auditor need evidence? 3. The...
Homework Answers
Answer 1
Meaning of Professional Skepticism
Professional skepticism refers to an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud and a critical assessment of audit evidence.
It is the duty of the auditor to plan and perform an audit with professional skepticism recognising that circumstances may exist that cause the financial statements to be materially misstated.
Professional skepticism is necessary for the critical assessment of the audit evidence obtained and it also includes consideration of the sufficiency and appropriateness of the audit evidence.
It includes being alert to the situations such as ✓ Conditions that may indicate possible fraud. ✓ Circumstances that suggest the need for audit procedures in addition to those required by the SA's, etc.
Thus professional skepticism is an ethical requirement relating to an audit of financial statements that requires the auditor to be alert to the conditions which may lead to material misstatement in the financial statements of the company.
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