CPA Exam — AUDEthics, Professional Responsibilities, and General PrinciplesMedium
A CPA firm is performing an annual audit for a public company. During the audit, the engagement team identifies several complex accounting issues related to revenue recognition for custom software development contracts. The engagement partner consults with an internal technical accounting specialist within the firm who is not part of the engagement team. What concept does this consultation primarily demonstrate?
- AProfessional skepticism.
- BQuality control.
- CEngagement planning.
- DProfessional judgment.
Show answer & explanationAnswer & explanation
Correct answer: D. Professional judgment.
Consulting a technical accounting specialist to resolve complex accounting issues demonstrates professional judgment, which involves the application of relevant training, knowledge, and experience within the context of auditing and accounting standards.
Why the other options are wrong
- A. Professional skepticism involves a questioning mind and critical assessment of audit evidence, not primarily internal consultation.
- B. Quality control relates to the firm's policies and procedures to ensure adherence to professional standards, not a specific consultation on an accounting issue.
- C. Engagement planning involves developing an overall audit strategy and detailed audit plan, which occurs earlier in the process.
Professional Judgment
The application of relevant training, knowledge, and experience in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.
- Involves critical thinking and experience.
- Used throughout the audit process.
- Aids in interpreting accounting and auditing standards.
Memory trick: Skeptical minds judge with care.