Companies Act 2014 section 1534

Professional scepticism

Section 1534 requires statutory auditors and audit firms to maintain professional scepticism throughout the entire audit process, particularly when reviewing management estimates and remaining alert to the possibility of material misstatement.

• Auditors must maintain a questioning and sceptical mindset throughout every stage of a statutory audit, not just at particular points.
• Professional scepticism is especially important when reviewing management estimates relating to fair values, asset impairment, provisions, and future cash flow projections that bear on going concern assessments.
• Auditors must always recognise the possibility of material misstatement caused by irregularities, including fraud or error, regardless of any prior positive experience with the honesty and integrity of the entity's management or those charged with governance.
• Professional scepticism is defined as an attitude that includes a questioning mind, alertness to conditions indicating possible misstatement, and a critical assessment of all audit evidence.