The IAASB has added its voice to the call for skepticism, issuing staff guidance in Q&A format to emphasize the importance of professional skepticism for auditors. The 16-page document reminds auditors about the importance of bringing a questioning mind to the audit to increase the chance of catching material misstatements.

In the aftermath of the 2008-2009 global financial crisis, audit inspection reports in various countries have noted areas such as fair value, related parties, and going concern assessments where auditors should have demonstrated a more skeptical approach, says IAASB Chairman Arnold Schilder. That prompted an IAASB advisory group to ask for a paper summarizing where existing auditing standards call for the use of skepticism. Ultimately the IAASB staff morphed the paper into guidance to be made available for auditors more directly. “This is such an important issue around the globe, coming forward in many audit inspections,” he says.

The paper illustrates that existing standards make a clear call for auditors to think and act skeptically, says Schilder, but adopting that mindset ultimately is a personal and professional duty for individual auditors to assume. Education, training, and experience play an important part, and the audit firms have some responsibility to cultivate a skeptical mindset among their auditors, along with regulators, oversight bodies, and those in charge of corporate governance, he says.

In the United States, when James Doty assumed his current role as chairman of the Public Company Accounting Oversight Board a year ago, he picked up a torch for an increase in auditor skepticism, prompting several auditing standards that are in development currently. Schilder says the current focus on skepticism among auditors isn't necessarily meant to suggest auditors have somehow forgotten their duties in this area. “It's not so much that auditors have become less skeptical,” he says. “There's an increasing need for skepticism to be applied. There are more and more ranges of judgments in financial accounts, like ranges of estimates for fair value, for example. There's less black and white than there was in the past that this is the right number.”

James Gunn, IAASB Technical Director, says there's also good reason to believe auditors may be thinking and acting with skepticism to a level not reflected in their audit documentation. “We hear from practitioners and engagement partners that in their day-to-day conversations with management, they are challenging the information they receive,” he says. “So the next question is where is the evidence?” The guidance emphasizes the importance of documenting such exchanges to establish skepticism is at work.

On a separate front, a sister body to the IAASB issued a proposed new definition for the term “engagement team” in the Code of Ethics for Professional Accountants. The International Ethics Standards Board for Accountants, which together with the IAASB operates under the International Federation of Accountants, issued the proposed new definition to answer concerns about a perceived inconsistency between independence requirements for external auditors and their use of internal auditors to perform audit procedures for the external audit.

“Anytime there's confusion over something in our code, we take it seriously and do what we can to offer clarification,” says Ken Dakdduk, chair of the IESBA.