CAEA 3228 ADVANCED AUDITING

Mini Assignment

DR. Noor Adwa Binti Sulaiman

DISCUSS ABOUT THE IMPORTANCE OF PROFESSIONAL SCEPTICISM IN ENSURING AUDIT QUALITY

Group members:

Intan Najwa Binti Abdullah CEA 120028

Noramirah Binti Samsul Saharudin CEA 120067

Nor Adli Syahirah Binti Abdullah CEA 120066

Nur Saiyidah Binti Mardi CEA 120077

CAEA 3228 ADVANCED AUDITING

Mini Assignment

DR. Noor Adwa Binti Sulaiman

DISCUSS ABOUT THE IMPORTANCE OF PROFESSIONAL SCEPTICISM IN ENSURING AUDIT QUALITY

Group members:

Intan Najwa Binti Abdullah CEA 120028

Noramirah Binti Samsul Saharudin CEA 120067

Nor Adli Syahirah Binti Abdullah CEA 120066

Nur Saiyidah Binti Mardi CEA 120077

Professional Skepticism?Professional Skepticism?

• ISA 200, paragraph 13(l) : 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.

• The auditor should assume that management is either honest nor dishonest.• mindset that drives auditor to adopt questioning approach in performing audit

works• Related to ethical principles which is objectivity and independence principles• Education, training and experience will influence professional skepticism.

• ISA 200, paragraph 13(l) : 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.

• The auditor should assume that management is either honest nor dishonest.• mindset that drives auditor to adopt questioning approach in performing audit

works• Related to ethical principles which is objectivity and independence principles• Education, training and experience will influence professional skepticism.

Audit Quality?Audit Quality?

• Periodic, independent, and documented examination and verification of

activities, records, processes, and other elements of a quality system to

determine their conformity with the requirements of a quality standards

• Any failure in their proper implementation may be published publicly and

may lead to a revocation of quality certification.

• Also called conformity assessment or quality system audit.

• Periodic, independent, and documented examination and verification of

activities, records, processes, and other elements of a quality system to

determine their conformity with the requirements of a quality standards

• Any failure in their proper implementation may be published publicly and

may lead to a revocation of quality certification.

• Also called conformity assessment or quality system audit.

How scepticism influence an auditor’s professional judgement??

How scepticism influence an auditor’s professional judgement??

• Auditors are selected and appointed by management and receive audit service fees from them. In order to ensure the quality of audit, they are expected to be objective and independent.

• It is important to know to what extent the relationship between the auditors and the company

• Professional judgement is the application of relevant training, knowledge and experience.• Auditors must be sceptical/alert to circumstances as follows: Engagement acceptance – more sceptical when considering audit engagement from a

new client because no past experience of the client’s integrity. Sufficiency and appropriateness of audit evidence – more sceptical in a situation that

indicates possible fraud. Reliability audit evidence – don’t merely accept the information given by audit clients

without questioning its reliability.

• Auditors are selected and appointed by management and receive audit service fees from them. In order to ensure the quality of audit, they are expected to be objective and independent.

• It is important to know to what extent the relationship between the auditors and the company

• Professional judgement is the application of relevant training, knowledge and experience.• Auditors must be sceptical/alert to circumstances as follows: Engagement acceptance – more sceptical when considering audit engagement from a

new client because no past experience of the client’s integrity. Sufficiency and appropriateness of audit evidence – more sceptical in a situation that

indicates possible fraud. Reliability audit evidence – don’t merely accept the information given by audit clients

without questioning its reliability.

The risks of material misstatements due to fraud- Fraud may be created if auditor fail to perform reasonable care and skills

Accounting estimates- Sceptical in judging the assumption used by the management

Going concern-Highly sceptical in their judgement when evaluating financial statement disclosures and its implications on the auditor’s report.

An auditor’s assessment will be more critical when he is more sceptical and alert to the facts and conditions he encounters during his audit engagement

The attitude of being sceptical facilitates him to appropriately apply his professional judgement regarding decisions about audit procedures to use

The risks of material misstatements due to fraud- Fraud may be created if auditor fail to perform reasonable care and skills

Accounting estimates- Sceptical in judging the assumption used by the management

Going concern-Highly sceptical in their judgement when evaluating financial statement disclosures and its implications on the auditor’s report.

An auditor’s assessment will be more critical when he is more sceptical and alert to the facts and conditions he encounters during his audit engagement

The attitude of being sceptical facilitates him to appropriately apply his professional judgement regarding decisions about audit procedures to use

ConclusionConclusion

• Professional scepticism and professional judgement are interrelated.

• An auditor might not be sceptical if he is not independent.• There is possibility that an auditor can produce wrong judgement if

he is not sceptical to consider the validity of the assurance regarding client’s financial statement.

• Auditor must maintain professional scepticism and heighten the scepticism in certain areas.

• Professional scepticism and professional judgement are interrelated.

• An auditor might not be sceptical if he is not independent.• There is possibility that an auditor can produce wrong judgement if

he is not sceptical to consider the validity of the assurance regarding client’s financial statement.

• Auditor must maintain professional scepticism and heighten the scepticism in certain areas.