The Auditing Practices Board (APB) of the FRC today issues for comment a Discussion Paper entitled ‘Auditor scepticism: Raising the bar’. This has been developed in close co-operation with the Professional Oversight Board (POB) and its Audit Inspection Unit (AIU), which monitors the conduct of audits of larger entities. Comments on the Discussion Paper are invited by 31 October 2010.

Professional scepticism is a crucial component of a high quality audit that pervades every aspect of the auditor’s judgement. The Discussion Paper emphasises the importance of scepticism to audit quality and draws on recent research to stimulate debate about what actions may be needed to ensure that the appropriate degree of scepticism is applied by auditors in practice.

Richard Fleck, Chairman of the APB and a director of the FRC said:

“We believe that the time is right for an informed discussion about the ‘right’ level of scepticism to be applied by auditors and the conditions that foster appropriate sceptical behaviour. The Audit Inspection Unit emphasised that close attention must be applied to scepticism in its recent annual report. We hope this paper will lead to a full discussion within the profession about what audit firms need to do to ensure that auditors are appropriately sceptical in practice and how companies and others can facilitate this in the interests of investors and other company stakeholders.”

The Discussion Paper may be downloaded, free of charge, from the Publications (Exposure Drafts) section of this website.

1. The FRC is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to:
   • establish high standards of auditing;
   • meet the developing needs of users of financial information; and
   • ensure public confidence in auditing.
3. The Professional Oversight Board contributes to the achievement of the Financial Reporting Council’s fundamental aim of promoting confidence in corporate reporting and governance. It has four main responsibilities:
   1. A statutory obligation to oversee the regulation of auditors by the recognised accountancy bodies;
   2. The monitoring of the quality of the auditing function in relation to economically significant entities;
   3. Independent oversight of the regulation of the accountancy profession by the professional accountancy bodies;
   4. Independent oversight of the regulation of the actuarial profession by the professional actuarial bodies.
4. The AIU’s Annual Report, which was published on 21 July 2010, can be found at: www.frc.org.uk/pob/audit/reports.cfm.
5. All press enquiries should be directed to: Marek Grabowski (Executive Director of the Auditing Practices Board) on 020 7492 2325, e-mail: m.grabowski@frc-apb.org.uk or Jonathan Labrey (Head of Communications, FRC) on 07760 990345, e-mail: j.labrey@frc.org.uk.