Skip to content

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

CA Neha is auditing Sagar Foods Ltd. She has a draft view that a judgment on provision estimates is reasonable. A reviewer asks how her professional judgment will be evaluated if the estimate later proves different. Per SA 200, on what basis is professional judgment evaluated?

Professional judgment is evaluated on whether it reflects competent application of auditing and accounting principles and is appropriate and consistent with the facts and circumstances known to the auditor up to the date of the auditor's report, not on later outcomes.

  1. AWhether the eventual outcome matched the estimate made at the report date
  2. BWhether the judgment reflects competent application of auditing and accounting principles and is appropriate given facts known up to the date of the auditor's reportCorrect
  3. CWhether the client's management agreed with the judgment in the management representation letter
  4. DWhether the judgment led to the lowest possible audit risk regardless of the facts known

Explanation

SA 200 says professional judgment is evaluated on whether it reflects a competent application of auditing and accounting principles and is appropriate in light of, and consistent with, facts and circumstances known up to the date of the auditor's report. Hindsight about later outcomes is therefore not the test. Management's agreement is irrelevant to evaluating the judgment.

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