Explain the need to plan and perform audits with an attitude of professional scepticism, and to exercise professional judgement.

Importance of Professional Scepticism: Professional scepticism is an essential attitude for auditors because it allows them to critically assess and question the information and explanations provided by the auditee. It helps in identifying inconsistencies, inaccuracies, or potential misstatements in the financial statements. Without professional scepticism, auditors may accept the information provided by the auditee at face value, which could lead to an inaccurate audit opinion.

Need for Planning: Planning is crucial in an audit because it helps in identifying potential areas of risk and material misstatements. It allows auditors to allocate their resources effectively and focus their efforts on high-risk areas. Without proper planning, auditors may overlook significant issues or fail to identify potential risks.

Exercise of Professional Judgement: Professional judgement is necessary for auditors to interpret the auditing standards and apply them to the specific circumstances of the auditee. It involves making informed decisions about the appropriate procedures to perform, the evidence to collect, and the conclusions to draw based on the evidence. Without professional judgement, auditors may not be able to appropriately apply the auditing standards or make accurate and reliable audit conclusions.

Overall, the need to plan and perform audits with an attitude of professional scepticism and to exercise professional judgement is crucial to ensure the accuracy and reliability of the audit opinion. It helps in enhancing the credibility of the financial statements and in maintaining public trust in the financial reporting process.