Auditing Exhibits a Credence Attribute
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Auditing exhibits a credence attribute:
The auditor provides the audit service itself (testing) and prepares the audit programme using professional judgment (expertise), which determines the level of auditor effort required to provide a reasonable level of assurance (planning).
The client is not able to demand a specific amount of auditor effort and usually relies on the auditors expertise to determine the required auditor effort.
The audit outcome (residual risk or achieved level of assurance) cannot be observed by the client; therefore, the client cannot determine whether the level of service provided is the level promised by the auditor or needed by the client.
Even if there is an audit failure, a reasonable level of assurance does not guarantee that that all risks have been mitigated i.e. there is always some residual risk (by the AR model).
Auditing exhibits a credence attribute:
The auditor provides the audit service itself (testing) and prepares the audit programme using professional judgment (expertise), which determines the level of auditor effort required to provide a reasonable level of assurance (planning).
The client is not able to demand a specific amount of auditor effort and usually relies on the auditors expertise to determine the required auditor effort.
The audit outcome (residual risk or achieved level of assurance) cannot be observed by the client; therefore, the client cannot determine whether the level of service provided is the level promised by the auditor or needed by the client.
Even if there is an audit failure, a reasonable level of assurance does not guarantee that that all risks have been mitigated i.e. there is always some residual risk (by the AR model).
Auditing exhibits a credence attribute:
The auditor provides the audit service itself (testing) and prepares the audit programme using professional judgment (expertise), which determines the level of auditor effort required to provide a reasonable level of assurance (planning).
The client is not able to demand a specific amount of auditor effort and usually relies on the auditors expertise to determine the required auditor effort.
The audit outcome (residual risk or achieved level of assurance) cannot be observed by the client; therefore, the client cannot determine whether the level of service provided is the level promised by the auditor or needed by the client.
Even if there is an audit failure, a reasonable level of assurance does not guarantee that that all risks have been mitigated i.e. there is always some residual risk (by the AR model).