Table of Contents- f8 Knowledge Summary (March/June 2018) Topic Page number

Engagement partner – The partner in the firm who is responsible for the audit engagement and its 
performance, and for the auditor’s report that is issued on behalf of the firm, and who has the appropriate 
authority from a professional, legal or regulatory body. 
 
Professional judgment – The application of relevant training, knowledge and experience, within the context 
provided by auditing, accounting and ethical standards, in making informed decisions about the courses of 
action that are appropriate in the circumstances of the audit engagement. 
Professional skepticism – An attitude that includes a questioning mind, being alert to conditions which may 
indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence. Professional 
skepticism includes being alert to, for example:
•
Audit evidence that contradicts other audit evidence obtained.
•
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.
•
Circumstances that suggest the need for audit procedures in addition to those required by the ISAs.
 
 

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F8 KNOWLEDGE SUMMARY-SKANS SCHOOL OF ACCOUNTANCY
7 
Inherent Limitations of audit/ Reasons why absolute assurance cannot be given 
1.
Sampling – it is not practical for an auditor to test 100% of transactions and so they have to apply 
sampling methodologies in selecting balances/transactions to test. Therefore, there could be an error in 
an item not selected for testing by the auditor. 
2.
Subjectivity – financial statements include judgmental and subjective areas and therefore the auditor is 
required to use their judgment in assessing whether the financial statements are true and fair. 
3.
Inherent limitations of internal control systems – an internal control system is operated by people and 
hence is liable to human error. In addition, there is the possibility of controls override by management 
and of collusion and fraud. It is impossible to remove all of these inherent limitations and as the auditor 
relies on the internal control systems, this can reduce the usefulness of the audit. 
4.
Evidence is persuasive not conclusive – the opinion is based on audit evidence gathered; however, while 
this evidence can indicate possible issues affecting the audit opinion, evidence involves estimates and 
judgments and hence does not give a definite conclusion. 
5.
Even if everything reported on was examined and found to be satisfactory, there may be other items 
which should have been included– the completeness problem. 
6.
Auditors plan their work to detect material errors and frauds only – so small frauds (or large frauds split 
into many small amounts) may go unnoticed.