1.In your OWN WORDS, explain what professional skepticism means. Feel free to use an example if it helps.
3. For each of the 3 scenarios, exert your professional skepticism in evaluating the situation. Answer the following:
a) Consider (and describe) different possibilities for what is happening. That is, what is causing the audit client to behave in this particular way? Describe all possibilities you can think of, from “legitimate” to “nefarious” reasons/causes.
b) Now that you’ve considered what could be happening – both “good and bad” – what are you most concerned with happening? That is, what is the prominent risk(s)? Explain.
c) As the auditor in the scenario, what would you do? How do you address the issue at hand and reduce your (and the audit firm’s) audit risk?
d) Of course, as an auditor you’re always dealing with other people. In this scenario, how would you try to manage the “interpersonal” dynamics? What do you do to maintain a good auditor-client working relationship, etc.?
