Professional scepticism.

Introduction

Auditing is one of most important aspects of financial institutions. Today, the auditing firms in Europe in general, and in Britain in particular are in a state of shock in the wake of recent media reports regarding the prevailing irregularities in the financial sector. The company's crisis can be explained by the influence of external factors, they can be the determining cause much of its success or failure without giving up their course on the influence of internal factors must also be taken into account. This approach can help guide the development of more accurate diagnoses for the company in crisis. A global treatment of the problems of accounting involves the study of the relationship between the company and its environment from a spatial perspective, the question that arises is how to characterize and describe the space within which the company exists (Alexander?, 1997).

There is an important element this is part and parcel of auditing; this element is referred to as professional skepticism. Professional skepticism is one of the important considerations for an auditor in performing audit and presenting the report to the audit committee. The paper aims to discuss the concept of professional skepticism and its importance with respect to auditing. It will also discuss case where business failures are evident mainly because of lack of professional skepticism (Alexander?, 1997).

Discussion

Professional skepticism as per the paragraph 23 of ISA 240 is an attitude that includes a questioning state of mind and a critical assessment of audit evidence and requires a "continuous questioning whether the information and audit evidence obtained suggests there may be a material misstatement due to fraud. They thus provide a set of procedures to be applied by the auditor to detect fraud. Manifestation of professional skepticism means the auditor is critical of the weight of the audit evidence obtained and carefully studied those that are contrary to the documents or statements of management, or cast doubt on the authenticity of such documents or statements (Jeffrey 2004, 25-72). Professional skepticism should be exercised during the audit that in particular does not lose sight of the suspicious circumstances, not to make unwarranted generalizations in the preparation of conclusions. In addition, faulty assumptions were used in determining the nature, timing and extent of audit procedures and evaluating their results. As part of the investigation and inspection procedures, the auditor should not assume that management is dishonest, but should not be assumed that the absolute honesty and leadership and those responsible for managing. Thus, the guidelines do not replace the need for sufficient evidence of the preparation of a reasonable conclusion, on the basis of which (? Alexander, 2000).

Enron

Enron was one of the largest energy companies, in 2001 Enron was ranked number seven by fortune magazine, and Enron had the market capitalization of around five hundred largest corporations in United States. Enron had witnessed swift and sudden collapse in their market value, due to this value change of the energy giant there have been many consequences, which impacted all stakeholders ...