IESBA Issues Consultation on Improving Professional Scepticism Standards

The International Ethics Standard Board of Accountants (IESBA) has issued consultation on how the standards relating to professional scepticism could be improved, and whether to make these standards mandatory to be complied with by the accountants and auditors.

The consultation paper has been developed through the collective collaboration between the International Auditing and Assurance Standards Board (IAASB) and the International Accounting Education Standards Board (IAESB). The consultation also includes suggestions from the Consultative Advisory Group of the IESBA.

The purpose behind issuing a consultation paper like this was to rediscover the lost public confidence on the global auditing and accounting profession following the discovery of a number of high profile accounting and auditing failures at various listed organizations around the globe.

The paper is a follow-up to the earlier discussions with the stakeholders regarding the absence of consistent approach in relation to professional scepticism across the profession with respect to audit and assurance engagements. It was admitted that professional scepticism is a concept that is difficult to define in a manner that is easy to comprehend and that is acceptable generally by all professions and stakeholders.

Professional scepticism is a concept that is interpreted differently by professionals working in different areas e.g. audit, non-audit functions and the preparation of financial statements.

Currently, the exercise of professional scepticism is not mandatory. However, the consultation considers whether this should be changed to increase the quality of audit process. Although, it would be a challenge to impose professional scepticism unilaterally as it depends on the engagement and the risks involved in it. The board considers that professional accountants should be able and willing to exercise professional scepticism in situations where they are being pressurized to act otherwise.

In order to deal with uncertainties involved in understanding the concept of professional skepticism, the consultation also proposed the change in definition of professional skepticism which would require amendment of the code but the board is of the opinion that it could raise more questions regarding the concept.

The consultation shall be discussed at three roundtable conferences to be held in Washington DC, Paris and Tokyo on 11 June, 15 June and 12 July respectively. The last date for the exercise of commenting on the consultation is 15 August 2018.