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Essay On Auditor Skepticism

825 Words4 Pages

It is important to the external auditors to maintain skepticism and professional due care in doing auditing. However, the level of skepticism of an auditors should not be decreased even though the level of fraud risk in the management was assessed to be low. If auditors have less skepticism and suddenly fraud was found in the management, hence it will caused auditors to do more audit procedures that is mean more costs to incur. Therefore, we recommend that, every auditors need to maintain their skepticism in doing audit work, no matter that auditors has belief the internal control of the management is good and whether auditors has experiences regarding the management fraud. Senior level of auditors may always supervise the lower level in ensuring that they are exercising professional skepticism as required.
Besides that, to detect management fraud, external auditor must looking at the size of the client. If the client is a small size business, auditors need to aware that fraud management may be higher that big size business client. Because there is less to maintain audit committee in the small size business, therefore auditors need to advice the internal control to exercise audit committee in the management in order to prevent fraud an also perform more test of controls. While a big size company, auditors need …show more content…

This will helps auditors in assessing the fraud in the management. However, the limitation of this theory is that type I and II errors will happen if auditors wrongly accept an audit evidence even though there is a fraud. This will cause type II errors where auditors may incur legal cost that is being sued by the client as auditors overlooked the fraud. While type I error will caused the auditors to do more audit procedures. Therefore, auditors need to exercise their skepticism instead of using the technologies aids in detecting the fraud

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