A recent research article notes that, to date, the Institute
of Internal Auditors (IIA) standards regarding periodic internal and external
quality assessments do not involve a formal and explicit evaluation of
“professional skepticism” (see IIA Standard 1300). But, there is a trend afoot
that asserts due professional care incorporates professional skepticism.
According to that article, “Professional skepticism can be
thought of as having a reasoning of mind to question what has been presented
for evaluative purposes—to look beyond the obvious in the search for revealing
information and relationships. In essence, it is more than taking the easy way
out. To do so, an individual must go beyond the face value.”
Furthermore, “Professional skepticism relies on the recognition
that something is awry and needs to be addressed. As such, performance in the
field should use this as the cornerstone for evaluation. ...At a truly effective
level of professional skepticism, one is able to draw on one’s past work
experiences and observations to make value-adding decisions about audit
evidence.”
So, how do you produce highly regarded financial statements
in the face of demands to minimize external audit costs? Many companies try to
solve this problem by using their internal audit department more during the
annual external audit. However, that can be tricky because the internal audit
staff is required to remain independent. The solution, say the authors of this
article, is to actively develop and maintain the internal auditors’
professional skepticism. And, the authors provide a detailed roadmap that shows
how to do that.
To learn more, read the research article Internal Audit - How to Develop Professional
Skepticism published in The
Journal of Corporate Accounting & Finance, May/June 2011. The research
was undertaken by Nicole McCoy, PhD, CPA, Louisiana Tech University; Royce D.
Burnett, PhD, CPA, and Marc Morris, PhD, both at Southern Illinois
University–Carbondale; along with Mark E. Friedman, PhD, CPA, University of
Miami.
Further guidance on the exercise of professional
skepticism is available in previous postings.
