Audit Quality Association with right client - Select client within risk tolerance Clear Standards and robust

audit tools - Firm's audit methodology - Independence policies Recruitment, development and assignment of qualified personnel - core competencies and skillsets - Capacity and resource management - Assignment of team members and specialists Technical excellence - Technical training and support Consultation processes - Business understanding and industry knowledge - to see if accounting treatment is reasonable Effective and efficient auditing - professional judgment and skepticism - direction, supervision and review - Critical assessment of audit evidence - appropriately supported and documented conclusions Commitment to continuous improvement - reviews, monitoring, compliance to SSQC 1 Independence: in fact and appearance - threats: financial interests, recent employment with client, nature and extent of fees charges (non audit fee less than audit fee - if more means not independent unless can justify), level of outstanding fees, nature and extent of litigation Professional judgment SSA 200.13(k) - appropriate application of relevant training, knowledge and experience in making informed decisions - establishing materiality - assessing various types of risks - allocating effort between tests of controls and substantive testing - evaluating effectiveness of controls - selecting audit procedures - external influences (firm culture and risk management process, state of economy)

Judgment bases - due to mental shortcuts people used to simplify judgment 1. Confirmation Draw things to agree with it, avoid information that contradicts it Affect where we collect evidence and how we interpret it May favor evidence that support a preconceived opinion: leading to disregard evidence that might be important 2. Overconfidence consider only one alternative, skipping evidence gathering, snap judgment, take too many projects, overpromise deadlines Risk of overestimation of sufficiency of audit evidence gathered Risk of acceptance of inaccurate client estimates 3. Anchoring and adjusting Mind tends to give a disproportionate amount of emphasis on the first information it receives So initial impressions tend to carry undue weight relative to subsequent information Underestimates the effect of new conditions in current year 4. Framing Tend to adopt the frame that is presented to them rather than restating the problem in their own way The way client presents certain information to auditors may affect their judgments, helping client to "disguise" certain info from auditors = be aware and apply critical thinking and professional skepticism to overcome traps and biases SSA 200.13(l) - professional skepticism: a questioning mind being alert to conditions which may indicate possible misstatement Apply on: - underlying management's estimates and data - going concern assumption and subsequent events - system generated reports, management reports - work of specialists and external experts test for integrity and accuracy of report before reliance