Question

Read the case below and given the knowledge you have obtained from this case study, what factors are critical to a professional auditor properly applying professional skeptisim?

Case Study A — Not Just a Trivial Item

I joined a Big Four accounting firm straight out of college a few years ago as a staff accountant. My first assignment on an audit engagement was a learning experience I would never forget; it was a practical lesson perhaps even more valuable than my newly minted accounting degree.

On our way to the client, Susan, a senior accountant and one of my new colleagues, cautioned me about the CFO:

“He has a bit of a reputation,” she said, adding, “Let me know if you have problems. And don’t let him browbeat you!” That comment, as an introduction to my brand-new career, was just a little unsettling.

I was given what seemed to be a nice, safe task: testing routine journal entries, which involved selecting items from the population and examining the supporting evidence. I asked a clerk for some reconciliations and a little later, to my surprise, I got a call from the CFO himself to ask why we were working on “trivial items” as he called it.

“We hired you for the big picture, not this kind of stuff,” was his terse comment, and he hung up before I could respond.

We were under a tight deadline to get the audit completed, and after several days there was no sign of the reconciliations I’d requested. I talked to Susan and later Mike, the engagement partner.

When I finally received the reconciliations and tested them, I noticed a high volume of journal entries that even to my inexperienced eyes seemed a little out of the ordinary.

Answer 1

Professional Skepticism 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.

The factors to a professional auditor properly applying professional skeptisim are as follows:

1 Being aware at all situations.

2. In case of any doubt consult your senior.

3. Do documentation and communication over the email and not oral communication.