Professional skepticism
Dr. Conchita L. Manabat
“Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor uses the knowledge, skill, and ability called for by the profession of public accounting to diligently perform in good faith and with integrity, the gathering and objective evaluation of evidence.”
–PCAOB
Over the past few years, the International Auditing & Assurance Standards Board (IAASB), the International Ethics Standards Board for Accountants (IESBA) and the International Accounting Education Standards Board (IAESB) have received calls to revisit and enhance existing materials in their respective standards regarding professional skepticism.
Comments/suggestions received from all sectors (collectively called stakeholders) led the standard setters to formally work on the concerns.
On July 12, 2018, the IESBA held a roundtable meeting in Tokyo, Japan to get inputs on its consideration of the longer-term issues on professional skepticism. There were 38 participants in the consultation deliberations. T
Two break-out groups were created to be able to have better exchange of ideas followed by a general plenary where there was a summation of items covered.
The discussions focused on key issues derived from received comments/suggestions and discussed in the Consultation Paper entitled Professional Skepticism – Meeting Public Expectations. Among the key issues highlighted in the roundtable were:
• Review of definition of professional skepticism (PS) or is there a need for a new term;
• Views on the concept of PS and the behavioral characteristics associated with public expectations of professional accountants;
• Concern on need to develop additional material on the importance of behavioral characteristics/mindset of professional accountants;
• Implications to international standards of related concerns; and
• Inclusion of upfront material in the Code to emphasize overarching professional responsibility of professional accountants.
Considering the mix of attendees from various sectors/representations (preparers and users of financial statements, auditors, regulators, professional organizations, etc.), the deliberations during the break-out sessions ranged from the very technical to the practical aspects of items under discussion.
All were in general agreement that there’s a need to have a better definition or perhaps adopt a better term to have a common understanding of what’s expected of professional accountants.
During the conclusion of the summation of proceedings, the facilitator commented that perhaps, professional mindset may be appropriate rather than professional skepticism. At the end of the day, professional conduct is driven by professional mindset.
The Tokyo roundtable was the third of the global roundtables (Washington DC, Paris, Tokyo and Sydney). A summary report on the results of the global roundtables on professional skepticism will pave the way to appropriate next steps on the call for better material on the subject impacting on international standards.
Dr. Conchita L. Manabat is a member of the Consultative Advisory Groups (CAGs) of the International Auditing & Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA). She can be reached at clm@clmanabat.com.
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