ICAS Professional Scepticism and Professional Judgement response

By James Barbour CA, Director, Policy Leadership

26 July 2017

James Barbour reports on the ICAS Ethics Board’s response to the IESBA Exposure Draft on proposed application material relating to professional scepticism and professional judgement.

The ICAS Ethics Board (“the Board”) has responded to the International Ethics Standards Board for Accountants (IESBA) exposure draft. Its main comments are:

  1. IESBA’s proposed revisions to the Code of Ethics (“the Code”) in relation to professional scepticism are only applicable to professional accountants who perform audit and other assurance engagements.  

    The Board is supportive of the view expressed by IESBA in the Exposure Draft that further work is needed in the longer term to “elaborate on the relevance of professional scepticism to compliance with the fundamental principles”.

    Specifically, the Board believes that consideration is required as to whether the concept of professional scepticism should be applicable to all professional accountants and not just those performing audit or other assurance engagements.

  2. The proposed IESBA revisions to the Code in relation to professional scepticism adopt the approach that complying with the five fundamental principles helps an auditor to exercise professional scepticism.  

    Whilst the Board acknowledges there is some merit in IESBA’s proposed approach, conceptually the Board would prefer the adoption of an approach that applies the logic that applying professional scepticism helps a professional accountant to comply with the fundamental principles.

  3. The Board believes that IESBA’s proposed application material in relation to “Exercise of Professional Judgement” does enhance the understandability of ‘The Conceptual Framework’ in Section 120 of the proposed restructured Code.

    However, the Board has some concerns that the substance of the “Reasonable and Informed Third Party Test” (paragraph 120.5 A2) is wider in scope than what is expected of the professional accountant in the proposed “Exercise of professional judgement” paragraph 120.5 A1.

    Specifically, the reasonable and informed third party test refers to “…all relevant facts and circumstances that the accountant knows, or could reasonably be expected to know, at the time the conclusions are made” whilst the content of the proposed “Exercise of professional judgement” paragraph refers only to “…the facts and circumstances known to the accountant”.  

    Whilst the Board appreciates that the subsequent bullet points in paragraph 120.5 A1 might be perceived by some to cover this apparent difference, it would prefer for the content of the “Exercise of professional judgement” paragraph to more clearly reflect the expectations expressed in the “Reasonable and Informed Third Party Test”.

The full ICAS response can be viewed on our Ethics Responses page.


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