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

While auditing Kaveri Foods Ltd., CA Meera finds that the sales register shows a large invoice to a related party recorded on 31 March, but the goods were dispatched on 6 April. She had planned her procedures with an attitude of accepting management's explanations without questioning. Which statement best describes the attitude SA 200 expects of her?

The auditor should apply professional scepticism, which is a questioning mind, alertness to conditions suggesting possible misstatement, and critical assessment of audit evidence. It does not mean presuming dishonesty or refusing contact with management. Here the dispatch date contradicts the recorded sale, so explanations must be corroborated.

  1. AProfessional scepticism, meaning a questioning mind alert to conditions indicating possible misstatement and a critical assessment of audit evidenceCorrect
  2. BProfessional independence, meaning she must avoid any contact with management during the audit
  3. CProfessional courtesy, meaning she should accept explanations from management of a listed or large company
  4. DProfessional liability, meaning she should assume that all transactions are fraudulent until proved otherwise

Explanation

SA 200 requires the auditor to plan and perform the audit with professional scepticism, being alert to contradictory evidence and critically assessing it. It does not mean assuming fraud, as in the last option, nor avoiding management.

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