The National Standards on Auditing (KSB)Additional contextPoland has adopted the International Standards on Auditing (ISAs) as its National Standards on Auditing (KSB), by resolution of the National Council of Auditors (KRBR), approved by PANA. The numbering follows the ISAs, so KSB 200 corresponds to ISA 200. do not, and cannot, contain a single, universal set of procedures. They are always applied in the context of a specific engagement. That is why KSB 200 requires the statutory auditor to exercise professional judgement, while KSB 330 and KSB 500 leave it to the auditor to decide which procedures to design in response to the assessed risks.
Professional judgement is therefore neither a gap in the standards nor a freedom outside them. It is part of the requirement. If a standard gives the auditor the right to choose procedures, exercising that right cannot at the same time be a breach of the same standard.
Nor is judgement limited to the choice of procedures. Under KSB 320, determining materiality is a matter of professional judgement: it is the auditor, knowing the specific engagement, who decides what in it matters to the users of the financial statements. KSB 500, in turn, points out that the strength of evidence depends on its appropriateness, not on its quantity alone. None of these provisions replaces judgement with a mechanical criterion.
What an inspection may and may not do
So what may an inspection do? It may check whether judgement was exercised, whether it is documented and whether it falls within the limits set by the standard. This is what KSB 230 requires: the documentation should enable an experienced auditor to understand what was done and why. Paragraph 8 specifies that this means enabling an auditor with no previous connection with the audit to understand not only the procedures performed and the evidence obtained, but also the “significant professional judgments made in reaching those conclusions”.
The same standard draws the line in the other direction. Application material A7 states that it is “neither necessary nor practicable for the auditor to document every matter considered, or professional judgment made, in an audit”. What is documented is what is significant, not every minor point considered. When the file grows beyond this measure because it is being prepared with the inspection rather than the audit in mind, we are dealing with defensive auditing.
What may an inspection not do? It may not replace the auditor’s judgement, made in real time and in the full context of the engagement, with its own judgement, made after the event, from behind a desk and on the basis of a selection from the file.
Free, but not arbitrary
The law has recognised this boundary for a long time. The same principles apply in every procedure in which someone assesses another person’s actions and acts on that assessment. The assessor must consider all the material, not a selected part of it. They base their assessment on all the circumstances taken together. They are guided by the rules of sound reasoning, knowledge and experience.
Case law puts this in a short formula: the assessment of evidence is free, but it may not be arbitrary. It remains protected by law only if it covers all the material, is consistent with logic and knowledge, and is convincingly reasoned. A reviewing body does not substitute its own assessment for someone else’s merely because it would have assessed the matter differently. It intervenes only when the assessment goes beyond those limits.
The same yardstick should apply to an inspector assessing an auditor’s judgement. The inspector may find that the judgement went beyond the limits of the standard. They may not treat it as a breach merely because they themselves would have chosen differently.
A record from which the assessment can be reconstructed
The requirement that work can be reconstructed applies in both directions. The auditor must document the audit so that an experienced auditor can understand what was done and why. The authority must document the inspection so that the inspected party and the court can understand what was checked, how, and why a given conclusion was drawn.
This is the safeguarding function of the inspection record. The record is an official document and carries special evidential weight. That is precisely why it must be possible to verify it. It should show who carried out which steps and when, which files and which parts of them were examined, by what method, and what was established in this way. A finding that does not show this cannot be verified. The inspected party cannot respond to it, and the court cannot review it.
The other side of this safeguard is the statement of reasons. A decision should indicate which facts the authority considered proven, which evidence it relied on, and why it refused to give credence to other evidence and to the explanations of the inspected party. Just as the auditor is bound to document, the authority is bound to give reasons. This requirement is one of the foundation’s proposals.
One judgement against another
When an inspector challenges an auditor’s judgement by invoking their own knowledge and experience, they are setting one professional judgement against another. A difference of judgement that stays within the bounds of reasonableness is not a breach of the standard. This is exactly the freedom that professional judgement is meant to protect.
The application material to the standards should be treated in the same way. The explanations and the examples they contain help to apply the requirements, but they are not requirements themselves. An example shows how one may proceed, not that this is the only permitted way. If it were otherwise, the choice that the standard entrusts to the auditor would narrow to the solutions given in the examples.