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

CA Nikhil is auditing Bharat Steels Ltd. He accepts the engagement with a mindset of questioning the validity of audit evidence and alertness to conditions suggesting possible misstatement, and he does not assume management is dishonest nor assumes unquestioned honesty. Which concept does this describe, and which is a correct implication under SA 200?

It is professional scepticism, an attitude including a questioning mind and critical assessment of audit evidence. The auditor stays alert to conditions that may indicate misstatement, neither assuming management is dishonest nor accepting its honesty without question, and does not rely only on management representations.

  1. AProfessional scepticism; the auditor should critically assess audit evidence and stay alert to contradictory evidence throughout the auditCorrect
  2. BProfessional judgment; the auditor may rely solely on management representations for material items
  3. CMateriality; the auditor may ignore small misstatements in all circumstances
  4. DIndependence; the auditor may not question documents given by the client

Explanation

This describes professional scepticism under SA 200: a questioning mind, alertness to contradictory evidence, and critical assessment of evidence. It requires neither assuming dishonesty nor accepting representations alone, so the other options misstate the concept and its implications.

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