Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

An auditor exercising professional skepticism considers which aspect when assessing risks of material misstatement due to fraud?

1. Authenticate documents used as audit evidence.

2. Consider the reliability of information to be used as audit evidence.

3. Adopt an attitude of acceptance unless evidence indicates otherwise.

4. Assess the entity's document-retention controls before using documents as audit evidence.

The correct answer is: Consider the reliability of information to be used as audit evidence.

An auditor exercising professional skepticism places significant importance on the reliability of information being used as audit evidence when assessing risks of material misstatement due to fraud. Professional skepticism is a mindset that involves questioning the appropriateness of the evidence gathered and the response to that evidence, especially in the context of evaluating potential fraud risks. When considering the reliability of information, an auditor evaluates the source and quality of the evidence, gathering information from independent and authoritative sources when possible. This critical assessment helps ensure that the evidence is trustworthy and can support or contradict management assertions, particularly when fraud might be involved. To break it down further, while authenticating documents and assessing document-retention controls are valid audit activities, they do not alone encapsulate the broad and nuanced nature of professional skepticism. Similarly, adopting an attitude of acceptance without sufficient evidence contradicts the fundamental principles of skepticism, which call for a questioning mindset rather than passive acceptance of presented information. Therefore, focusing on the reliability of information is core to exercising professional skepticism effectively.