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

CA Vikram, auditor of Himalaya Foods Ltd, signs his report on 20 May. In July, new facts show that a judgment he reasonably made on an inventory estimate turned out wrong. A reviewer asks whether Vikram's professional judgment was poor. Based on SA 200, how should the judgment 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, not by later outcomes.

  1. ABy checking whether the eventual outcome matched the estimate, irrespective of information available earlier
  2. BBy 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 reportCorrect
  3. CBy whether the client management agreed with the judgment at the time
  4. DBy whether the judgment was the most conservative option available

Explanation

SA 200 says professional judgment can be evaluated on whether it reflects a competent application of auditing and accounting principles and is appropriate given facts known up to the date of the auditor's report. Hindsight outcome is not the test, so the first option is wrong.

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