- Auditors must exercise professional judgment, which requires professional scepticism.
- Lack of professional scepticism by auditors has become a key focus of regulators worldwide.
- There are practical ways auditors and firms can develop a clear-eyed and questioning attitude.
Fostering professional scepticism
Because professional scepticism is integral to professional judgment, it’s essential to high-quality auditing. Yet audit inspections by the Australian Securities & Investments Commission (ASIC) and the New Zealand Financial Markets Authority (FMA) have raised concerns about the level of scepticism being shown by auditors.
What is professonial scepticism?
To show professional scepticism means:
- having a questioning mind
- being alert to anything that may indicate misstatement due to error or fraud
- critically assessing audit evidence.
What factors drive scepticism?
Many factors influence the level of professional scepticism shown by auditors and engagement teams, including:
- personal attitudes and ethical values
- levels of education, training and experience, and therefore overall competence
- the actions of the firm’s leadership and the engagement partner
- the culture, incentives and business environment of the audit firm.
How can I boost professional scepticism?
- Have the self-conﬁdence and strength of character to maintain an enquiring mind.
- Suspend trust: rationally and logically consider all the likely options, not just the one that is being put in front of you.
- Resist the temptation to just accept the easy answer.
- Go beyond simply providing evidence to support disclosures. Consider alternative disclosures or viewpoints as well.
The Art of Professional Scepticism series
The following 5 guides make up the series:
- The Art of Professional Scepticism: an overview of the series
- Art of Relationship Building guide
- Art of Problem Solving guide
- The Art of Enquiry: A guide for auditors on asking questions
- Spotlight on specific audit areas (the case studies)