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

Partner CA Latha reviews a junior's judgement on an accounting estimate of Orion Steels Ltd after the audit report was signed. New information has emerged after the report date that the auditor did not know earlier. In evaluating whether her professional judgment was sound, which test aligns with SA 200?

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. Information emerging afterwards is not the yardstick.

  1. AJudgment is sound only if the later outcome matches the estimate exactly
  2. BJudgment 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 reportCorrect
  3. CJudgment is evaluated using all facts known at the date of review, including later ones
  4. DJudgment cannot be evaluated because it is subjective

Explanation

SA 200 states that professional judgment can be evaluated based on whether it reflects competent application of auditing and accounting principles and is consistent with facts and circumstances known up to the date of the auditor's report. Hindsight facts are therefore not the test, so option C is wrong.

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