Question

Professional skepticism means that internal auditors beginning an assurance engagement should?

1) Assume client personnel are dishonest until they gather evidence that clearly indicates otherwise
2) Assume client personnel are honest until they gather evidence that clearly indicates otherwise
3) Neither assume client personnel are honest nor assume they are dishonest
4) Assume that internal controls are designed inadequately and/or operating ineffectively

Answer 1

Professional skepticism in internal auditing means that auditors should neither assume client personnel are honest nor dishonest, maintaining neutrality until evidence guides their conclusions. This approach ensures auditors remain unbiased and critically assess all evidence gathered during an assurance engagement.

Step-by-step explanation:

Professional skepticism is a critical aspect of an internal auditor's duty when starting an assurance engagement. The correct approach that defines professional skepticism is not to assume that client personnel are dishonest or honest but rather to maintain a neutral stance until evidence suggests otherwise. Therefore, neither assume client personnel are honest nor assume they are dishonest is the correct mentality to approach an audit with professional skepticism.

This approach allows internal auditors to conduct their work with an open mind, critically evaluating evidence without bias. Professional skepticism encourages auditors to be alert to conditions that may indicate possible misstatement due to error or fraud, and to critically assess audit evidence. It is the balanced application of a questioning mind and a critical assessment of the appropriateness and sufficiency of audit evidence.