Question

Professional skepticism is relevant and necessary throughout all assurance engagements. Define professional skepticism and discuss some areas where professional skepticism is particularly important in an audit.

Answer 1

Professional skepticism is an attitude of being alert to conditions which may indicate possible misstatement due to error or fraud , having a questioning mind and a critical assesment of audit evidence. It is very important while doing audit because it all depends on the intellectual power of the auditor for him to be able to audit the statemnets amd records in true manner.

The auditor is required to use professional skepticism at various stages of audit process

At the time of performing risk assessment

At the time of obtaining audit evidence

At the time of evaluating evidence

To be able to detect frauds

While making accounting estimates

Taking consideration of laws and regulations