Professional Judgment (Meaning and importance)

It’s a mindset or thought process to be exercised by the auditor throughout the audit (start, during and end of the audit) and this professional judgment is essential on matters relating to items that involve estimates & judgment. This judgment is obtained by past experience of conducting various audits and by qualification obtained and it is better exercised by senior engagement audit team members. An external auditor must take informed decision about the course of action to be followed by him on the basis of relevant training, knowledge and experience (Training in the audit firm and performing audits for various clients), and keeping in view the guidance provided by auditing and accounting (IFRS) standards. Areas where professional judgment is exercised must be appropriately documented in the audit working papers.