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Not the Spanish Inquisition

How do you demonstrate the required level of professional scepticism in practice? Adrian Gibbons highlights the importance of critically assessing audit evidence and adequately documenting it.

The other day, I sat with one of the three partners at a firm discussing its response to a recent visit from ICAEW’s quality assurance department (QAD). Overall the visit had gone well but one comment, on the lack of professional scepticism demonstrated on the audit file, caused some discussion. “I don’t understand this comment,” said one partner. “We always challenge the client on issues that have an impact on the accounts. What more do they expect us to do?”

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The answer lies in the definition of professional scepticism. According to ISA (UK and Ireland) 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with International Standards on Auditing, professional scepticism is: “An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.”

At the firm I was visiting, the audit partners and their team have a healthy dose of scepticism. But the recording that is needed is hinted at by the phrase “a critical assessment of audit evidence”...

This is an extract from an article in the June 2014 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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