Professional scepticism is defined in the auditing standard ISA 200 as the auditor having a questioning mind and being alert to conditions which could indicate misstatement in the report and accounts due to error and fraud, and critically assessing audit evidence.
Professional scepticism remains a key focus for the audit profession - a lack of scepticism is a recurring finding in audit inspections across different parts of the globe.
Despite significant work on improving audit standards in this area, and in understanding of the risks of cognitive bias, this joint report concludes that auditors need to continue to improve their approach to professional scepticism, making full use of the right resources and auditing standards.
One of the key elements in promoting the exercise of an appropriate level of scepticism in audit work is for auditors to be aware of cognitive biases.
Although cognitive biases may explain auditors' failure to exercise proper professional scepticism at the appropriate level, it is not the only reason; other factors such as fear of losing an audit engagement also affect professional scepticism.
Authority bias - the tendency to attribute greater accuracy to the opinion of an authority figure - could have a key impact on the quality of audits, given the extensive and increasing use of experts, particularly in specialised sectors and sustainability assurance engagements.
These insights and conclusions on the current state of professional scepticism and cognitive biases in the audit and assurance profession emerge from research by and HAASOB (the Hellenic Accounting and Auditing Standards Oversight Board). The report highlights the importance of a robust exercise of professional scepticism and emphasises the importance of recognising the influence of cognitive biases on auditors and other stakeholders.
In its conceptual framework, the International Ethics Standards Board for Accountants (IESBA) recognises that "conscious or unconscious bias affects the exercise of professional judgement when identifying, evaluating and addressing threats to compliance with the fundamental principles." Examples of bias defined in the report include anchoring, confirmation and groupthink.
Mike Suffield, director of policy and insights, ACCA, says: "The audit profession is currently undergoing major reform globally with the enhancement of audit quality being one of the top priorities. The exercise of an appropriate level of professional scepticism is an integral part of high-quality audits."
Panagiotis Giannopoulos, deputy chairman, HAASOB, says: "In this report, HAASOB and ACCA set out some of the recurring issues, often highlighted in audit inspections, relating to the auditors' performance in exercising professional judgement and professional scepticism, using examples inspired by inspection findings.'
The research uses examples based on inspection findings in Greece. It discusses how recognising the influence of cognitive biases could have resulted in a more robust exercise of professio
