Professional Skepticism Prof Annette Khler IAASB Member and
Professional Skepticism Prof. Annette Köhler, IAASB Member and Working Group Chair IAASB CAG Meeting September 15, 2015 Page 1
Background and Introduction • ISAs define professional skepticism as an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of evidence – Interrelated with fundamental concepts of independence of mind, objectivity and professional judgment, and contributes to audit quality – Also addressed in the IESBA Code and IAESB’s education standards • February 2012 Staff Publication addresses how professional skepticism applies to audits of financial statements Page 2
Why Should the IAASB Consider a Professional Skepticism Project Now? • Calls for enhanced auditor professional skepticism from many stakeholders, including – Regulator and audit oversight authorities – Outreach and other national initiatives – Academic research • Working Group established comprising of representatives from IAASB, IESBA and IAESB – Collaborated approach that includes other standard setting boards Page 3
PSWG Objective • To determine the conceptual issues related to professional skepticism, broadly across all the international standards (audit, ethics and education), and a) Identify where further alignment is needed, or where gaps exists; and b) Make observations or recommendations for further actions, as needed. Page 4
Key Questions Relevant for Determining a Way Forward • Based on extant international standards (audit, ethics and education): a) What is professional skepticism (PS)? Are the requirements and expectations clear? (e. g. , Are the links between PS, and the concepts of assurance, evidence, engagement risk, due care, integrity, independence of mind, objectivity, and competence sufficiently clear and well understood? ) b) What are the skills and competencies required for applying PS? c) What are the impediments affecting the consistent application of professional skepticism? • Based on the responses to a–c, what observations can be made about each suite of standards? Page 5
June 2015 Panel Discussion • Panelists/ IAASB shared perspectives and considered underlying issues and brainstorm potential solutions • Concept of professional skepticism is complex and difficult to address because of behavioral and psychological aspects – Influenced by personal traits (i. e. , attitudes and values), state-specific aspects (i. e. , knowledge and experience of individual auditors), as well as culture – Solutions beyond standard setting needed – Need for a further understanding of what triggers inspection findings • CAG to be informed by one of the June 2015 panelists Page 6
Next Steps • Invitation to Comment (ITC) planned for December 2015 approval – ITC intended to address matters relevant to the IAASB’s work on the topics of quality control, group audits, financial institutions and professional skepticism – Summary of the June 2015 panel discussion to be included in the ITC • Research synthesis to be considered in December 2015 – Research synthesis aimed at summarizing ongoing and released work on the topic of professional skepticism since 2013 Page 7
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