4.7 - Overall Objectives of an Auditor

Question 1

What is the first objective of an auditor?

Answer 1

To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework

Question 2

What is the second objective of an auditor?

Answer 2

To report on the financial statements and communicate as required by the ISA Standards, in accordance with the auditor’s findings

Question 3

In order to achieve these objectives, what are the first two things an auditor must do?

Answer 3

• comply with relevant ethical requirements
• plan and perform the audit with professional scepticism

Question 4

In order to achieve these objectives, what are the other two things an auditor must do?

Answer 4

• exercise professional judgement
• obtain audit evidence that is both sufficient and appropriate, from which reasonable conclusions may be drawn, on which the auditor’s opinion is then based

Question 5

Define professional scepticism

Answer 5

An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatements due to fraud or error, and a critical assessment of audit evidence

Question 6

Define professional judgement

Answer 6

It is the application of relevant training, knowledge and expertise in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement

Question 7

Regarding professional scepticism, what four things must an auditor be alert to?

Answer 7

• audit evidence that contradicts other audit evidence obtained
• information that brings into question the reliability of documents and responses to inquiries to be used as audit evidence
• conditions that may indicate possible fraud
• circumstances that suggest the need for audit procedures in addition to those required by ISA Standards

Question 8

In which five areas is professional judgement required?

Answer 8

• materiality and audit risk
• nature, timing and extent of audit procedures
• evaluation of whether sufficient, appropriate audit evidence has been obtained
• evaluating management’s judgements in applying the applicable financial reporting framework
• drawing conclusions based on the audit evidence obtained

Question 9

What five things may hinder one’s professional scepticism?

Answer 9

• lack of relevant technical or analytical skills
• excessive trust in the client and in the explanations given by client staff
• timidity and a lack of assertiveness
• lack of sufficient audit experience for the tasks allocated
• a checklist approach to audit procedures