Professional Skepticism Explain why professional skepticism is important in making professional judgments. What are the types of actions that a professionally skeptical auditor will take?

Answer 1

Professional skepticism is important because without it auditors are susceptible to accepting weak or inaccurate audit evidence. By exercising adequate professional skepticism, auditors are less likely to overlook unusual circumstances, to over generalize from limited audit evidence, or to use inappropriate assumptions in determining the nature, timing, and extent of audit procedures. An auditor who is professionally skeptical will do the following:
• Critically question contradictory audit evidence
• Carefully evaluate the reliability of audit evidence, especially in situations in which fraud risk is high and/or only a single piece of evidence exists to support a material financial accounting transaction or amount
• Reasonably question the authenticity of documentation, while accepting that documents are to be considered genuine unless there is reason to believe the contrary
• Reasonably question the honesty and integrity of management, individuals charged with governance, and third party providers of audit evidence.
• Be sure to collect sufficient evidence so that judgments are not made in haste or without adequate support.
• When evidence is contradictory, be particularly diligent in evaluating the reliability of the individuals or processes that provided that evidence.
• Generate independent ideas about reasons for unexpected trends or financial ratios rather than simply relying on management's explanations.