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

Sundaram & Co., Chartered Accountants, are auditors of Kaveri Textiles Ltd. During the audit, the engagement partner decides to carry out the work with an attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence. Which term under the Standards on Auditing describes this attitude?

The attitude described is professional scepticism. SA 200 defines it as a questioning mind, alertness to possible misstatement from error or fraud, and critical assessment of audit evidence. Independence, reasonable assurance and materiality refer to different concepts and do not describe this attitude.

  1. AProfessional scepticismCorrect
  2. BProfessional independence
  3. CReasonable assurance
  4. DMateriality

Explanation

SA 200 defines professional scepticism as an attitude that includes a questioning mind, alertness to conditions indicating possible misstatement, and critical assessment of audit evidence. Independence concerns freedom from threats to objectivity, not the attitude towards evidence. Reasonable assurance is the level of comfort obtained, and materiality is a threshold for misstatements.

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