The APB issues Feedback Paper on Auditor Scepticism
News types: Feedback Statement
Published: 10 March 2011
A copy of the Feedback Paper may be downloaded free of charge from the publications section of the APB’s web site (Discussion Paper 'Auditor Scepticism: Raising the Bar').
Richard Fleck, Chairman of the APB and a director of the FRC said:
“While responses to the Discussion Paper demonstrate widespread agreement on the critical importance of auditor scepticism to audit quality, there is less agreement on the nature of scepticism and its role in the audit. The APB intends to undertake further work in this area to ensure there is a consistent understanding of its nature and role, increased transparency of its application and appropriate consideration of the financial statement presentation of matters subject to significant challenge by auditors. In addition, the POB will consider what policies and procedures are needed to ensure that audit firms develop and nurture the appropriate mindsets in their partners and staff and the AIU will continue to focus on the extent to which scepticism has been applied in practice in those audits subject to inspection”.
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Ensuring that there is a consistent understanding of the nature of professional scepticism and its role in the conduct of an audit.
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Reviewing ISAS (UK & I) for possible ambiguities in relation to the nature and importance of professional scepticism, and proposing such changes as may be needed to make sure the position is clear.
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Reviewing ISQC (UK & I) 1 to ensure that it has sufficient requirements and guidance relating to the need for firms to have appropriate policies and procedures for promoting the competencies that underlie professional scepticism.
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Considering how the application of scepticism can be made more transparent.
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Considering, with other parts of the FRC, whether there is a need for guidance on the approach to be taken by auditors when considering the presentation in the financial statements of matters that have been the subject of significant challenge by the auditors.
In addition the Audit Inspection Unit will continue to focus on the extent to which scepticism has been applied in practice and the Professional Oversight Board will explore how scepticism is recognised within the audit firms’ competency frameworks.
Notes to Editors
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The FRC is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
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The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to:
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establish high standards of auditing;
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meet the developing needs of users of financial information; and
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ensure public confidence in auditing.
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In June 2010 the FSA and the FRC issued a DP 10/03 entitled ‘Enhancing the Auditor’s Contribution to Prudential Regulation’. One of the issues explored in that Discussion Paper was how the application of professional scepticism could be enhanced in the key areas of judgement concerning accounting estimates and related disclosures. While the considerations in ‘Auditor Scepticism: Raising the Bar’ are wider than those relating just to the audits of financial institutions in the recent banking crisis, there were a number of commonalities in many of the responses received to these two consultations.