The paper "The Definition and Application of Professional Skepticism" is a great example of a finance and accounting coursework. Auditors find it very fundamental to apply professional scepticism in audit quality. In auditing literature, there exist various perspectives and definitions of professional scepticism. Professional scepticism reflects the attitude that concentrates the critical audit assessment and a questioning mind. It is very relevant in the effective audit performance under the Board of standards. This essay seeks to establish the definition and application of the Professional scepticism indicating factors that may affect it as well.
The objective of the study is to clearly indicate how professional scepticism is relevant in the field of audit (Glover & Prawitt, 2014). The definition and application of professional scepticism Professional scepticism refers to an attitude involving a questioning mind that is very alert to conditions that can make an indication of possible misstatements (Carpenter, 2009). The misstatements may be as a result of fraud or error and a critical audit evidence assessment. The standards of Auditing explicitly call for the auditors to perform and plan audits with professional scepticism. At the same time, they recognise that a circumstance may exist hence causing financial reports to be misstated materially.
Professional scepticism is, therefore, a mindset that is very important. The behaviour of an auditor is driven by the sceptical mindset. The auditor hence attempts to adopt an approach of questioning when forming conclusions and considering the information. Professional scepticism, in this regard, is linked inseparably to the important principles of ethics of auditor independence and objectivity. Professional scepticism is an element that is inescapable in professional judgement exercise. The auditing profession recognises that to maintain a scepticism attitude is a requisite ingredient in due professional care exercising.
The Professional scepticism concept is very pervasive throughout the standards of auditing. The concept invokes scepticism as a component of performing and planning the audit that is necessary. Contemporarily, scepticism’ s competing perspective can be gotten in either auditing standards or academic literature. Audit training and education are impeded as long as disagreement regarding how much scepticism is viewed as sufficient and what sceptical behaviour is. The most fundamental issue in the disagreement is about the auditor’ s initial mindset.
This is, in particular, towards management as an information source. It is argued, on one hand, that the job of an auditor is remaining neutral and objective throughout the process of audit. On the other hand; however, it is also argued that the mindset of an auditor should be doubtful and full of distrust from an engagement’ s mindset. There is as well the professional scepticism volatile nature and many other factors in the environment of audit that are likely to threaten the ability of an auditor to have sceptical behaviours. Application Some regulators suggest that the appropriate professional scepticism application to some extent helped firms in avoiding alleged audit deficiencies (Australian Government, 2012).
To a large extent, the application of Professional scepticism is done by being alert. Being alert, for instance, to the evidence of audit that brings contradiction to other evidence of audit initially obtained. Or rather, to information that questions the documents’ reliability or enquiries responses to be used the evidence of audit. Further, professional scepticism involves being alert to a condition that could make an indication of possible fraud or error.
And to a circumstance that suggests the audit procedures audit in addition to the requirements of the Auditing Standards. Professional scepticism as well includes audit evidence critical assessment. The audit evidence comprises both information corroborating and supporting the assertions of management together with any information contradicting such assertions. To apply Professional scepticism in such a manner means considering and questioning the appropriateness and sufficiency of the evidence of audit obtained during new circumstances. in case there is a doubt regarding information reliability or an indication of possible fraud or error, there are requirements of the Auditing Standards that are to be met.
It calls for more investigation by the auditor and determines the additions or modifications to the procedures of an audit or any other additions to the procedures of audit necessary to solve a given issue. Other issues involved such as the cost, time and difficulty are not valid bases of auditors to make omissions of the procedures of audit where there are no alternatives or audit evidence satisfaction that is not persuasive in any manner (Australian Government, 2012).
List of references
Yankova, K., 2015, The Influence of Information Order Effects and Trait Professional Skepticism on Auditors’ Belief Revisions: A Theoretical and Empirical Analysis. New York: Springer.
Australian Government, 2012, 'Professional Scepticism in an Audit of a Financial Report', AUASB Bulletin, pp. 1-8.
Carpenter, T., 2009, Professional Skepticism: The Effects of a Partner’s Influence and the Presence of Fraud on Auditors’ Fraud Judgments and Actions, J.M. Tull School of Accounting , pp. 1-40.
Endrawes, M., & Monroe, G., 2012, PROFESSIONAL SCEPTICISM OF AUDITORS: A CROSS-CULTURAL EXPERIMENT. Retrieved September 9, 2015, from unisa.edu.au:
Glover, S. M., & Prawitt, D. F., 2014, 'Enhancing Audit Proffesional Skepticism: The Proffessional Skepticism Continuum, Current Isues in Audinting, Vol.8, No.2, pp.1-10.
Westermann, K., Cohen, J., & Trompeter, G., 2014, Professional Skepticism in Practice: An Examination of the Influence of Accountability on Professional Skepticism. Retrieved September 9, 2015, from isarhq.org: