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CMA Intermediate · Corporate Accounting and Auditing · Brief Introduction to Auditing Standards

SA 200 explains that professional judgment can be evaluated by reference to certain matters. Which of the following is the basis stated for evaluating professional judgment?

Professional judgment is evaluated by whether it reflects a 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 by hindsight about later events.

  1. AWhether the judgment turned out to be correct based on events occurring after the auditor's report date
  2. BWhether the judgment reflects a competent application of auditing and accounting principles and is consistent with the facts known to the auditor up to the date of the auditor's reportCorrect
  3. CWhether the judgment was approved by the management of the entity before the report was signed
  4. DWhether the judgment matches the judgment reached by the previous auditor of the entity

Explanation

SA 200 says 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, facts and circumstances known to the auditor up to the date of the auditor's report. Hindsight about later events is therefore not the test, which is why the first option is wrong.

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