Syllabus B. Planning And Risk Assessment B2. Objective and general principles

B2b. Professional Scepticism and Judgement

Syllabus B2b)

Explain the need to plan and perform audits with an attitude of professional scepticism, and to exercise professional judgment.

When planning and performing an audit, the auditor should adopt an attitude of professional scepticism

It is “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”

In other words, they must not simply believe everything management tells them

The exercise professional judgement in planning and performing an audit

The auditor will need to exercise professional judgement on both the quantity and the quality of evidence.

So he has to judge..

  1. When is there sufficient evidence?

  2. What is the quality of this evidence

  3. Is it consistent with what is known from elsewhere?

  4. Are assumptions reasonable? 

    The auditor needs to not only see a record of what the assumptions are, but also challenge them and understand how they affect the conclusions the client has come to.

Factors to help with the judgement are...

  • The seriousness of the risk

  • The materiality of the item

  • The strength of internal controls

  • The sampling method used (see later)