Question

    In relation to materiality principle, determining a

    percentage to be applied to a chosen benchmark, would require the exercise of ________Ā  on part of the auditor. Refer to the following information to answer the next 4 questions (Q17 to Q20) The word Audit is derived from Latin word ā€œAudireā€ which means ā€˜to hearā€™. Auditing is the systematic examination of financial statements, records and related operations to determine adherence to generally accepted accounting principles, management policies and stated requirement. Importance of auditing can be judged from the fact that even those organizations which are not covered by Companies Act get their financial statements audited. It has become a necessity for every commercial and even non- commercial organization. A company appoints an auditor who submits his opinion on the truthfulness and fairness of the financial performance and position of the company. An auditorā€™s Report is the format of result of all the effort that goes into the audit. Communicating the Auditorā€™s findings to interested users is part of all audits. Thus, the Final phase of an Audit involves preparing that communication, which is known as auditorā€™s report.
    A Professional Independence Correct Answer Incorrect Answer
    B Professional behaviour Correct Answer Incorrect Answer
    C Professional Ethics Correct Answer Incorrect Answer
    D Professional judgement Correct Answer Incorrect Answer
    E Professional skepticism Correct Answer Incorrect Answer

    Solution

    Professional Judgement is the application of relevant training, knowledge and experience within the context provided by auditing, accounting and ethical standards in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.Ā  It is required with respect to Materiality and audit risk, nature, timing and extent (NTE) of audit procedures, evaluating sufficiency & appropriateness of audit procedures, evaluating management judgement in applying applicable FRF and drawing conclusions based on audit evidence

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