Professional Judgement vs Professional Scepticism

Fact – Professional Judgement

• ISA 200 describes professional judgement as the application of relevant training, knowledge and experience in making informed decisions about audit matters. Malaysian Institute of Accountants

Fact – Professional Scepticism

• ISA 200 defines professional scepticism as an attitude that includes a questioning mind, being alert to conditions that may indicate misstatement, and a critical assessment of audit evidence. UKM+4Malaysian Institute of Accountants+4Malaysian Institute of Accountants+4

• ISA 240 requires the auditor to maintain professional scepticism throughout the audit, recognising the possibility of fraud even if management seems honest. accaglobal.com+2Malaysian Institute of Accountants+2

Elaboration – Difference

Aspect	Professional Judgement	Professional Scepticism
Nature	Decision-making process	Mindset / attitude
Focus	Choosing what to do and how to conclude	How critical and questioning the auditor is
Example of use	Deciding materiality, sampling size, type of opinion	Questioning management’s explanations, looking for contradictory evidence

• Judgement = “Which procedures are appropriate? Is this misstatement material?”
• Scepticism = “Can I trust this evidence? Are there signs of bias or fraud?”

Example

• Management explains a sudden jump in revenue as “strong year-end promotions”.
• Professional scepticism: Auditor does not accept this blindly, but asks:

  • “Can I see sales contracts? Are there unusual terms, like returns or side agreements?”

• Professional judgement: Based on the evidence, the auditor decides whether the revenue is properly recognised, and whether a modified opinion is needed.

They work together: good judgement must be applied with a sceptical attitude.