A recent article in GAA Accounting notes that “Professional scepticism is central to audit quality, but a balance must be struck between doubt and practicality.” Furthermore, “Professional scepticism is a skill considered by many as the cornerstone of audit quality.” In fact “A review of the International Standards on Auditing (ISAs) reveals the need for auditors to “exercise professional judgment” more than 200 times. To assist assurance providers to enhance their professional scepticism, the New Zealand Auditing and Assurance Standards Board (NZAuASB) is developing an Explanatory Guide which contains references to practical guidance on professional scepticism in an audit of financial statements.”
“The essence of scepticism is doubt, and that doubt
stimulates informed challenge and inquiry. Doubts often arise from apparent
conflicts between what drivers exist in the wider environment in which a client
operates (i.e. macro level) and how clients believe they have performed within
the context of that environment (i.e. micro level). Professional scepticism
encourages a structured consideration of an alternative point of view.” “However, being too sceptical can be detrimental to the
audit. Too much scepticism can lead to over-auditing, which can lead to
problems meeting deadlines and with the overall economics of the audit
engagement. Therefore, just as it is important to demonstrate scepticism, it is
also important to ensure the level of scepticism is appropriate in the
circumstances – achieving the right balance.”
The audit scepticism issue is not confined to New Zealand.
In their recent auditor inspections, the UK Audit Inspection Unit (AIU) and the
US Public Company Accountants Oversight Board (PCAOB) cited a lack of
professional scepticism as a serious problem for auditors. A common argument as
to why professional scepticism is not as prevalent as it should be is that the
barriers are too high. A number of barriers have been identified
internationally. Learn more by reading the article “The
Pros and Cons of Professional Scepticism” by Zowie Murray, CA, Audit and
Assurance Specialist, New Zealand Institute of Chartered Accountants
(NZICA) Technical Services Team. In addition, see the previous posts on Professional
Skepticism.
