Without proper application of professional skepticism, the effectiveness of audit procedures is diminished. As a result, the sufficiency and appropriateness of audit evidence obtained is negatively impacted.
Concern about instances when auditors did not appropriately apply professional skepticism in their audits is a recurring theme in audit inspection findings globally and has been a key issue in discussions about audit quality.
But what is professional skepticism in the context of an audit? In layman’s terms it is a mindset where an auditor does not simply accept information or audit evidence at face value. Rather, the auditor applies a reasonably questioning attitude while performing the audit.
Regulatory bodies have suggested that auditors’ enhanced professional skepticism will contribute significantly to improving the quality of audits and that firms should prioritize efforts in this area. A question then is whether the auditing standards themselves could better address the application of professional skepticism?
Auditing standards for audits not subject to PCAOB standards (i.e., US GAAS as promulgated by the AICPA) explicitly recognize the fundamental importance of professional skepticism. In US GAAS, AU-C 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards, officially defines professional skepticism as an attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.
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Bob Dohrer, CPA is Chief Auditor at the AICPA. He was the Global Leader - Quality & Risk for RSM between 2012 and 2018 where he had overall responsibility for the network’s audit and other attest services policies, procedures and guidance. Bob was also responsible for overseeing RSM’s global quality inspection programs in accordance with...