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CA Intermediate · Auditing and Ethics · Nature, Objective and Scope of Audit

CA Meera is planning the audit of Deccan Steels Ltd. She notes that the statutory books show regular small differences in stock records, but she decides to perform all procedures with an attitude that questions the validity of evidence and alerts her to conditions suggesting possible misstatement. Which SA 200 concept does this best describe?

This is professional scepticism. Under SA 200 it means keeping a questioning mind, staying alert to conditions that may indicate misstatement due to error or fraud, and critically assessing audit evidence instead of accepting management's representations at face value throughout the audit.

  1. AProfessional scepticismCorrect
  2. BMateriality
  3. CAudit risk
  4. DSubstantive independence

Explanation

SA 200 defines professional scepticism as an attitude that includes a questioning mind, being alert to conditions indicating possible misstatement, and critical assessment of audit evidence. Materiality relates to the size of misstatements influencing users, and audit risk to the risk of an inappropriate opinion. 'Substantive independence' is not the relevant term.

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