Due Professional Care in Audit – What does it really mean?

The auditor‘s ability and willingness to communicate with the client and professionalism in work as variable independent have a significant effect on client responses in taking part and supporting auditor’s inquiry. Both auditor’s communication and professional attitude effect to a successful audit process.

Due professional care is required and applied when audits are carried out in accordance with the standards set for the profession. The auditor is normally obligated to exercising due professional care by the terms of the engagement letter; the obligation exists even if it isn’t always specifically said in the engagement letter.

Proving that an auditor has exercised due professional care constitutes a whole defense against any charge introduced through a plaintiff. This evidence constitutes the bulk of the work in defending against lawsuits.

Unfortunately for the auditor, proving one’s case can be tough whilst subsequent events come to be worse than the auditor should have expected, in which case the defense needs to also deal with the issue of whether the auditor needs to have visible a future event coming.

The matter of due professional care means what the independent auditor does and how appropriately he or she does it. An auditor should possess the degree of skill and competence commonly possessed by other auditors and should exercise it with proper care and diligence.

Auditors should be assigned to duties and supervised commensurate with their level of knowledge, skill, and potential to evaluate the audit evidence they’re examining.

The engagement partner must know, at a minimum, the applicable professional accounting, and auditing standards. The engagement partner is responsible for the assignment of tasks to the team members and the supervision of the members of the engagement team.

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Professional Skepticism:

Due to professional care means the auditor is required to exercise professional skepticism. Professional skepticism is a mindset that consists of questioning thought and a crucial evaluation of audit evidence.

The auditor uses the skill and knowledge called by the profession of public accounting to diligently perform, in suitable faith and with integrity, the collection and objective evaluation of evidence.

Evaluating audit evidence requires the auditor to remember the competency and sufficiency of the evidence. Since evidence is accumulated and evaluated throughout the audit, professional skepticism ought to be exercised during the audit process.

The auditor neither assumes that control is deceptive nor assumes everything is perfect. In exercising professional skepticism, the auditor should not be satisfied with less evidence because of the trust that management is honest.

Reasonable Assurance:

The exercise of due professional care allows the auditor to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error, or whether any material misstatement exists.

Absolute assurance is not possible due to the nature of audit evidence and the characteristics of fraud so reasonable assurance is a high degree of assurance.

Therefore, an audit conducted according to the requirements of the Public Company Accounting Oversight Board (United States) won’t detect a material weak point in internal control over financial reporting or a material misstatement to the financial statements.

The unbiased auditor’s objective is to achieve sufficient appropriate evidential to offer her or him with a reasonable basis for giving an opinion.

The nature of most evidence derives, in part, from the idea of selective trying out of the information being audited, which entails judgment regarding both the areas to be examined and the nature, timing, and volume of the exams to be performed.

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In addition, audit judgment is needed in interpreting the consequences of audit testing and evaluating audit evidence. Mistakes and errors in judgment can be made even with good integrity.

Moreover, accounting presentations comprise accounting estimates, the size of that is inherently uncertain and depends on the results of future events.

The auditor practices professional judgment in evaluating the reasonableness of accounting estimates based totally on information that would reasonably be predicted to be available prior to the completion of fieldwork.

Because of the characteristics of fraud, a nicely planned and achieved audit may not detect a material misstatement. Characteristics of fraud include:

  • Concealment through collusion among control, employees, or third parties;
  • Withheld, misrepresented, or falsified documentation; and
  • The potential of control to override or train others to override what otherwise appears to be powerful controls.

Since the auditor’s opinion on the financial statements or internal control over financial reporting is primarily based on the concept of obtaining reasonable assurance, the auditor isn’t always an insurer and his or her document does not represent a guarantee.