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Chapter 1

Professional scepticism

The application of an appropriate degree of professional scepticism is an essential
skill for accountants, especially for those working in assurance and audit.
Professional scepticism is an attitude of mind that ensures auditors are prepared to
challenge management’s assertions, and be alert to possible misstatements in the
financial statements due to error or fraud. Auditors initially approach an audit without
a strong belief that either the financial information is misstated or that management
are other than honest and truthful. But if an auditor obtains information suggesting
that the financial information could be misstated, they will step up their enquiries and
look for more audit evidence to resolve issues, especially if they are concerned about
the accuracy of the evidence or the integrity of those providing it.

A sceptical mindset will be influenced by an individual’s personality, their experience,
their education and training, and by the culture of the firm where they work. It is
through professional development and experience that an auditor learns the ‘right’
level of scepticism to be applied in different circumstances.

Professional accountants must recognise that scepticism is an integral part of their
work and is closely interrelated to the fundamental concepts of independence and
objectivity. Ethical Standards address the issue of auditors placing too much trust in
their clients through requirements such as rotation of audit firms and partners and
staff, and the prohibition of certain non-audit services, but ultimately it is the
responsibility of individuals to perform their work with an appropriate degree of
scepticism and challenge.

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