Final answer:
Professional skepticism means internal auditors should neither assume client personnel are honest nor dishonest, maintaining an objective stance and investigating with a questioning mind until sufficient evidence is gathered.
Step-by-step explanation:
Professional skepticism is an essential principle in the field of auditing. It refers to the approach internal auditors should take when starting an assurance engagement. The correct answer to the student's question of what professional skepticism means in this context is 'c. neither assume client personnel are honest nor assume they are dishonest'. This means that internal auditors should maintain an objective state of mind throughout their assessment, recognizing the possibility that material misstatements or fraud could exist, without having a predetermined conclusion about the honesty of the client personnel or the effectiveness of internal controls until they have sufficient evidence to support their findings.
It's important to remember that exercising professional skepticism involves a balanced approach of critical assessment and inquiry. Auditors should investigate with a questioning mind, critically assess audit evidence, and be alert to conditions that may indicate possible misstatement due to errors or fraud.