Skip to content

CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

CA Anita is reviewing her file for Bharat Agro Ltd. A reviewer questions her judgment on an inventory valuation issue, noting that new information emerged two months after her report date and showed her conclusion to be mistaken. On what basis does SA 200 say professional judgment can be evaluated?

Professional judgment is evaluated by whether it reflects a competent application of auditing and accounting principles and is appropriate in light of, and consistent with, the facts and circumstances known to the auditor up to the date of the auditor's report. Later hindsight is not the test.

  1. AWhether the final outcome later proved her conclusion correct, using all information available even after the report date
  2. BWhether the judgment reflects a competent application of auditing and accounting principles and is consistent with facts and circumstances known to the auditor up to the date of the auditor's reportCorrect
  3. CWhether the client management agreed with the judgment
  4. DWhether the judgment matched the approach adopted by other firms in the same industry

Explanation

SA 200 says professional judgment is evaluated by whether it reflects competent application of auditing and accounting principles and is appropriate in light of facts and circumstances known up to the date of the auditor's report. Hindsight information arising later is therefore not the test, which makes option 1 wrong.

Did you get it right without looking?

One question tells you little. A timed set on General Auditing Principles and Auditors Responsibilities shows your real accuracy, how long you take and where you lose marks.

Practise General Auditing Principles and Auditors ResponsibilitiesFree diagnostic mock

More General Auditing Principles and Auditors Responsibilities questions