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August 15, 2017

Standard setters publish joint report on the need for more professional scepticism

By Stephanie Wix

The International Auditing and Assurance Standards Board (IAASB), the International Ethics Standards Board for Accountants (IESBA), and the International Accounting Education Standards Board (IAESB) have jointly published a report on enhancing professional scepticism.

The report Toward Enhanced Professional Skepticism noted that the importance of enhanced professional scepticism is underscored by the increasing complexity of business and financial reporting. This included the greater use of estimates and management judgment, business model changes due to technological developments, and the fundamental reliance of the public on dependable financial reporting. The report stated that professional scepticism is at the heart of a quality audit.

There were seven key observations in the report on what is important for professional scepticism;

  • Increased attention to business acumen
  • Environmental factors can influence ability
  • Awareness of personal traits and biases
  • Building in professional scepticism from the outset is key
  • The three standard setting boards can do more in the immediate and the longer term
  • Other aspects apart from audit underlying professional scepticism may be relevant to all professional accountants
  • Standard setting alone will not be enough

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