Audit Judgements and their Recent Impact on Audit Engagements

• In Event: Accounting, Behavior, and Organizations: Auditing

Abstract

Every audit engagement is unique, so it is important to utilize professional judgement to form an audit opinion. One auditor characteristic that influences the outcome of an audit engagement and its findings is the auditor’s or auditing firm’s professional judgement. Professional judgement can be composed of an auditor’s company, their educational background, professional background, experiences, the auditor and auditee relationship, the work and business environment, and the accounting environment. When it comes to education, research suggests that accounting students within a professional program are more likely to express a higher level of trait skepticism on their audit judgements than students at the undergraduate level (Fatmawati et al., 2018). For audits to be supported and accurate, professional judgement has to be exercised as it uses their expert knowledge and experience on a particular audited item so that the most appropriate accounting treatment can be determined and communicated. However, the use and effectiveness of professional judgement have declined due to new accounting standards and other influences.

Audit judgement significantly impacts all parties associated with an audit engagement. The auditor, the auditee, and the general public are all either positively or negatively impacted if audit judgement is utilized or underutilized, respectively. Firstly, audit judgement impacts the auditor because it can determine whether or not a true and unbiased audit opinion is the outcome of an audit engagement. Secondly, the Auditee is impacted because the outcome of the audit engagement can show whether or not the auditee is following generally accepted accounting principles. Even if a firm is following to appropriate accounting guidelines, if the auditor is not expressing professional judgement, an incorrect audit opinion could be made determining that the auditee is not complying with accounting guidelines. Lastly, the general public, which includes investors and customers, is impacted because an audit opinion can influence whether or not a firm would be a good investment. Audit judgement is essential to the profession of accounting, and due to the current lack in auditors conveying auditing judgement, audit quality has declined.

Author

• Garrett Thibodeaux, Graduate Student