Should Professional Scepticism be exercised by all professional accountants?
By James Barbour, Director of Policy Leadership, Technical Adviser on IESBA and member of the IESBA Professional Scepticism Working Group
24 May 2018
The International Ethics Standards Board for Accountants (IESBA) has published a consultation paper on professional scepticism. The deadline for comments is 15 August 2018.
The consultation paper explores:
- The behavioural characteristics comprised in professional scepticism;
- Whether all professional accountants should apply these behavioural characteristics; and
- Whether the restructured Code should be further developed to address behaviours associated with the exercise of appropriate professional scepticism.
Through this initiative, the IESBA also aims to reinforce the effective exercise of professional scepticism by auditors. The consultation paper was developed following close coordination with the International Auditing and Assurance Standards Board (IAASB) and the International Accounting Education Standards Board (IAESB), and with advice from the IESBA Consultative Advisory Group.
Options
IESBA highlights the following options in its paper:
1. Require all professional accountants to exercise “professional scepticism” in the manner defined in the International Standards on Auditing, namely: “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 the evidence.”
2. Require all professional accountants to exercise “professional scepticism” (i.e., retaining the term “professional scepticism”), but to develop a different definition that would be appropriate for all types of professional activity.
If this approach were adopted, the definition of “professional scepticism” would encapsulate the behaviour along the following lines: “Approaching professional activities with an impartial and diligent mindset and applying this mindset and relevant professional expertise to the evaluation of information with which they are associated.”
3. Develop a different term to use with the definition of behaviour expected of all professional accountants.
4. Conclude that no new requirements or concepts are required in the Code but rather to develop additional application material to expand upon the concepts underlying the existing fundamental principles. In doing so, the Code would express more explicitly (and with examples) the behaviour expected of all professional accountants. The behavioural characteristics required might include critical thinking, challenging mindset, and moral courage. The objective would be to address the fact that, although implicitly embedded in the Code, the key behavioural characteristics that underpin “professional scepticism” in the broader context do not currently have sufficient profile, or the focus necessary, to promote the behaviour sought.
IESBA is also considering whether it should develop additional material to increase awareness of bias, pressures and other impediments, and how they should be addressed. This material would be independent of any new definition and/or application material described earlier.
The consultation paper will form the basis for discussion with a wide range of stakeholders at a series of three global roundtables in Washington, DC, USA on June 11; Paris, France on June 15; and Tokyo, Japan on July 12.