The paper "What Is Professional Skepticism, Results of the ASIC Audit Inspection " is a perfect example of a finance and accounting assignment. Professional scepticism is a condition in which the mind is prepared to find out errors or question various financial events while performing assurance engagements (Bagshaw, 2013). Professional scepticism is basically a skill which enables the auditor to be alert in a given situation. The auditors are always alert for any reaction that might occur in the financial activities of the organization. These are relevant questions that ensure the information and reports are true.
It is essentially an attitude which encompasses a questioning mind. With this attitude, the auditor asks several questions which can be helpful in realizing future consequences. The auditors measure all the side effects of the information they acquire by their questioning mind or attitude. In addition, they ask questions which can help in making a critical assessment of various financial activities with strong proof (Bagshaw, 2013). In essence, ISA 200 demands the use of professional scepticism as a way of enhancing the ability of the auditor to realize the risks of misstatements and take action to the identified risks.
Professional scepticism is strongly related to the fundamental moral considerations of the auditor’ s independence and objectivity. Additionally, professional Scepticism involves professional judgement by the auditor. An audit without the professional scepticism attitude is likely to be of low quality. Application of professional scepticism should ensure the auditor does not neglect odd circumstances, adopt incorrect assumptions when formulating the audit response needed and address recognized risks or oversimplify results from various audit procedures. This is all-important in improving audit quality (ISA 200, 2009). An auditor should perform and plan an audit with professional scepticism and realize that circumstances may occur that cause various financial statements to be misstated.
The auditor needs to be alert to: The audit gave evidence that contradicts audit evidence acquired. Information that questions the trustworthiness of various documents and responses to questions to be utilized as audit evidence. Any condition that might designate possible fraud. Various circumstances that recommend the need for audit measures in addition to the ones needed by ISAs (ISA 200, 2009). 2. Explain how professional scepticism relates to obtaining reasonable assurance about a client Professional scepticism can be used in accessing the client engagement acceptance.
At this level, the auditor considers whether the management of projected audit client operates with integrity and if there is any factor that may affect the auditors and hinder them from acting with professional scepticism on accepting the engagement (ISA 200, 2009). Professional scepticism also relates to obtaining reasonable assurance about the client when performing various risk assessment procedures. The auditors should use professional scepticism when performing risk assessment measures for the client at their planning phase of the audit.
For instance, when access results of investigative procedures with the management, they should not admit explanations by the management at face value; they should attain corroboratory proof for the explanations presented. Through this, they are capable of obtaining reasonable assurance from the client that their audit is accurate (ISA 200, 2009). Additionally, the auditors can also use professional scepticism in obtaining audit evidence. In order to obtain reasonable assurance, the auditor needs to be ready to challenge the administration, more specifically on subjective and complex matters and on matters that need a high level of judgement to be exercised.
The sufficiency and reliability of evidence should be given more consideration, specifically where there are fraud and risks. There might be some issues that may arise at some point during the audit that can affect professional scepticism, for instance, the administration may decline the auditor from gaining information from a third party. When this occurs, the auditor will have to put into consideration the quality of evidence received from the administration. ISA 200 records that a conviction that administration and those in governing positions are honest and trustworthy does not ease the auditor of the desire to uphold professional scepticism or permit the auditor to be contented with audit evidence which is less persuasive when obtaining reasonable assurance (ISA 200, 2009). Reasonable assurance can also be obtained when evaluating evidence.
An auditor with professional scepticism should critically and analytically analyze the audit evidence and pay more attention to contradictory evidence that might destabilize the efficiency, appropriateness and sufficiency of evidence obtained. In addition, the auditor should use professional scepticism in examining the opinions of other auditors about a client by considering the general sufficiency of proof to support the audit judgement and by evaluating if the financial statements depict the appearance of the underlying events and transactions.
Eventually, utilization of professional scepticism should limit detection of risk since it enhances the efficiency of practical audit procedures and lowers the possibility that the auditor will arrive at an unsuitable conclusion when evaluating various results of the audit procedures (Basu, 2009). 3. Are the results of the ASIC audit inspection report consistent with the application of professional scepticism by auditors? Justify your answer with reference to the ASIC report. The reports in the ASIC audit inspection are inconsistent with the application of professional scepticism by auditors (ASIC, 2015).
The report provides information concerning how the auditors failed to provide an accurate audit of the financial reports and errors made in their auditing procedures. According to ISA200, when obtaining reasonable assurance, the professional editor should be accountable for maintaining professional scepticism all through the audit, considering the possibility of management override of controls and realizing the fact that audit processes which are efficient in realizing the error might not be efficient in detecting fraud.
The results found that the auditors did not provide the exact position of the firm.
ASIC.(2015). Audit inspection program report for 2014–15. Retrieved at http://d ownload.asic.gov.au/media/3491241/rep-461-published-15-december-2015.pdf
Bagshaw, K. (2013). Audit and assurance essentials for professional accountancy exams.
Basu, S. K. (2009). Fundamentals of auditing. Delhi: Pearson.
Financial Reporting Council. (2012). Establishing a common and reaffirming its central role in delivering audit quality. Retrieved at. https://frc.org.uk/Our- Work/Publications/APB/Briefing-Paper-Professional-Scepticism.pdf
IAASB. (2014).Work Plan for 2015–2016: Enhancing Audit Quality and Preparing for the Future. Retrieved at. https://www.ifac.org/system/files/publications/files/IAASB- Work-Plan-2015-2016.pdf
INTERNATIONAL STANDARD ON AUDITING 200. (2009). Overall Objectives Of The Independent Auditor And The Conduct Of An Audit In Accordance With International Standards On Auditing . retrieved from. http://www.ifac.org/system/files/downloads/a008-2010-iaasb-handbook-isa-200.pdf