Proficiency and Professional Judgment Documentation: the Independent Auditor’s Responsibility

Proficiency and Professional Judgment Documentation: the Independent 

Auditor’s Responsibility

Mohammed J. Masoud, CPA, CACM, CFE, CICA, MBA

The American Anti-Corruption Institute (AACI)

Invited paper presented at the

The Second Accounting and Auditing International Conference

Organized by

 The Palestine Association of Certified Public Accountant (PACPA)

Ramallah – Palestine

May 28-29, 2014

Abstract

This conference paper conducts a review of the published auditing literature with respect to the responsibility of the independent auditor[1] regarding the required level of proficiency she/he should possess in conducting a financial statements audit. It also reviews the independent auditor’s responsibility in documenting her/his professional judgments[2] reached for in a financial statements audit.  The objective of this paper is to address the challenges the independent auditor faces to comply with relevant International Standards on Auditing (ISAs); specifically the International Standard on Auditing 230:” Audit Documentation”. Further, this paper discusses the interrelationships between the independent auditor’s proficiency and professional judgment and their impact on audit effectiveness. We found that independent auditors are requested and expected to document in sufficient and proper details in the audit file (work papers) not only the audit judgments of significant matters, but also to demonstrate that the audit was planned, performed, and opined using the optimum mix and the cutting edge of knowledge, education, experience, rules, regulations, and the relevant auditing and accounting literature.

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[1] The terms auditor and independent auditor are used interchangeably throughout this conference paper.

[2] Professional judgment; audit judgment, professional audit judgment; and judgment are used interchangeably throughout this conference paper.

LINKS

The complete conference paper: https://drive.google.com/file/d/0B4sCwzCGinSwdC1xYmdYMjBDbXc/edit?usp=sharing

The PowerPoint presentation of the conference paper: https://drive.google.com/file/d/0B4sCwzCGinSwTUQ0YjN2UGZtUGs/edit?usp=sharing

Bad Grades Are Rising for Auditors

As reported by the New York Times on August 23, 2012 by FLOYD NORRIS, it becomes clear that this is only one facet of the audit industry failure. This is a really disturbing news report supported by a recent report of the PCAOB. It is an alarming report not only for the regulators in the USA, but also to each country's regulators regarding the audit industry in each respective country. 

It is globally accepted that once the public no longer trust the output of an auditor, the auditor or the audit firm loses any justification to continue in business. Should not each country have a regulatory agency that is mandated to do a similar work like that of the PCAOB? I think the answer is yes it should. In my opinion, corruption is one reason, among others, that prevents too many countries from devoting sufficient and  appropriate attention to the audit profession despite the strategical value of this industry.