Accounting and auditing is very important for an organisation as it can help to evaluate performance and financial strength of the company (Quadackers, Groot and Wright, 2014). Auditing is the process of analysing and examining financial statements of an organisation in which it is assessed that all the recorded information is appropriate or not. It is essential for a business to conduct regular audit so that it can be determined that organisation is performing well or not. Accounting is an activity which is performed by accountants of company and they record, summarize, analyse accounting information. Recorded data is presented in front of the auditors and then they examine transparency and appropriateness. All the books, accounts and statements are checked in auditing and the report of auditor is presented in front of the stakeholders so that they can analyse actual position of the company.
Professional scepticism is the combination of rules and regulation that are formed by IAASB for organisations that needs to be followed at the time of accounting and auditing (Professional scepticism, 2018). For a company it is very important to follow proper process for internal as well as external audit. It includes quality control, assurances, auditing, reviewing and other services. Every company have to conduct internal auditing in which an auditor is hired and an audit report is generated which is based on the accounting informations that are recorded in the financial statements.
For an auditor it is essential to plan and perform auditing activities by following professional scepticism in which transparency of the data is analysed and than a report is presented to stakeholders so that they can get exact information of organisational position and image in the market. Business entities have to follow all the accounting standards while recording transactions in the books of accounting. If the recorded data is accurate and exact then it can facilitate auditors while whole auditing process.
Auditing can evidence all the errors, contradictions, materiality of information, frauds, performance and financial strength of a company with the help of final accounts that are generated by accountants. Professional scepticism is related to fundamental ethical considerations of an auditor's independence. It is also linked with the application of professional judgement which is provided on the transparency of the data recorded in books of accounting. If it is not followed by the auditor than the reports cannot show the accuracy and not considered as a good quality report. Auditor should apply professional scepticism while assessing engagement acceptance, analysing risk procedures, obtaining evidences for audit and at last while evaluating appropriateness of evidences. It helps the auditor to form right opinion and to check that financial statements that are presenting fair view of the company (Hurtt and et. al., 2013).
For every organisation it is very important to record right information in the books of accounting so that the auditor can analyse transparency of the same. Professional scepticism is a set of rules and regulations that are introduced by IAASB for every organisation that are required to follow while recording transactions in the books of accounting.
- Hurtt, R. K. and et. al., 2013. Research on auditor professional skepticism: Literature synthesis and opportunities for future research. Auditing: A Journal of Practice & Theory. 32(sp1). pp.45-97.
- Quadackers, L., Groot, T. and Wright, A., 2014. Auditors’ professional skepticism: Neutrality versus presumptive doubt. Contemporary accounting research. 31(3). pp.639-657.