The Importance Of Professional Scepticism Throughout The Audit

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1. The importance of professional scepticism throughout the audit and to give pragmatic examples of instances where large firms of auditors have failed to employ sufficient scepticism apart from the area of asset impairment.
Professional scepticism
The complex nature in today’s world of accounting is fuelled by subjective assumptions, estimates and judgements in areas such as revenue recognition, asset impairment, lease obligations and tax matters. Audits, particularly statutory auditing, undoubtedly enhances the degree of confidence for users of financial statements. Along with being independent, auditors must possess the attitude of being professionally sceptical. It is not a total distrust of what is seen or heard in an audit but rather it requires an enquiring mind that is open to the possibilities that something may be materially misstated whether by human error or fraud. Professional scepticism is required at all stages of an audit; from accepting the engagement to gathering and evaluating evidences. According to ISA 240, ‘The auditor shall maintain professional scepticism throughout the audit, recognising the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor’s past experience of the honesty and integrity of the entity’s management and those charged with governance’ (ISA240.12). Areas where accounting estimates are involved and in situations such as unusual transactions, the going concern assumption or related party
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