## Professional Skepticism (SA-200)

Professional Skepticism (PS) is a core auditor attitude combining a questioning mind with critical assessment of evidence. It is not the same as suspicion — it is disciplined alertness.

### When Must the Auditor Apply PS?

The auditor must remain alert to four key triggers:

#	Trigger	Practical Implication
1	Audit evidence contradicts other audit evidence	Investigate the inconsistency; do not average or ignore
2	Information questions document reliability	Seek corroboration; consider authenticity
3	Conditions may indicate possible fraud	Escalate within the engagement team
4	Need for additional procedures beyond SAs	Tailor the audit programme accordingly

### How PS Reduces Audit Risk

Maintaining PS throughout the audit reduces three specific risks:

1. Over-generalisation in conclusions — jumping to broad conclusions from limited evidence

2. Overlooking unusual circumstances — e.g., treating a one-off large transaction as routine

3. Using inappropriate assumptions when designing NTE (Nature, Timing, Extent) of procedures

### Key Distinction: PS vs. Professional Judgment

	Professional Skepticism	Professional Judgment
What it is	The attitude	The application of knowledge and experience
When applied	Throughout the audit	When making specific decisions

Both are required throughout the audit; neither replaces the other.

Worked example

### Example 1

The auditor notes that inventory count sheets show 5,000 units, but purchase and sales records imply only 4,200 units should be on hand. A professionally skeptical auditor does NOT simply accept the count — they investigate the 800-unit discrepancy, checking for unrecorded sales, fictitious purchases, or theft, rather than assuming the count is correct.

### Example 2

Management provides a legal opinion letter from an external lawyer stating a ₹2 crore lawsuit will not succeed. A professionally skeptical auditor considers: (a) Is the lawyer independent? (b) Does the letter address the specific risk? (c) Does other evidence (court documents, prior hearings) support or contradict this view? PS prevents blind reliance on a single favourable document.

⚠️ Common exam mistakes

Thinking PS only applies during fraud investigations — it must be maintained throughout ALL phases: planning, execution, and completion.
Treating PS as equivalent to distrust of management — PS is a questioning mind, not blanket suspicion; management representations can still be accepted when supported by evidence.
Confusing PS with Professional Judgment — PS is the attitude you bring; PJ is the decision-making process applied using that attitude.
Applying PS selectively to high-risk areas only — SAs require it to be maintained throughout the entire audit.

Bare-Act text Professional Skepticism · SA 200 — Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing (ICAI) · click to expand

Professional skepticism includes being alert to: audit evidence that contradicts other audit evidence; information that brings into question the reliability of documents and responses to inquiries to be used as audit evidence; conditions that may indicate possible fraud; and circumstances that suggest the need for audit procedures in addition to those required by SAs.

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