ACCA is calling for changes to the standard-setting, regulatory and audit processes to take personal bias into account, in a bid to improve audit quality and encourage greater professional scepticism
The institute’s research suggests market participants need to take a holistic approach and to think more actively about cognitive bias – underlying behavioural drivers that could influence decision making – and take steps to minimise its impact on audit quality.
ACCA wants standard-setters to design audit standards with an eye to mitigating the impact of known biases on decision-making. Amongst other methods, this would involve reviewing possible ‘bias’ within auditing standards and articulating the importance of minimising known bias in application guidance or other explanatory material.
Regulators are encouraged to focus on improvements that support greater audit quality. ACCA says regulators need to be realistic about the limits on completely mitigating bias, and to recognise the ‘human factors’ within the regulatory process.
Auditors, when designing and performing audit procedures, must be more aware of their own subconscious bias, and should take active steps to mitigate its impact on the audit.
Andrew Gambier, head of audit at ACCA, said: ‘The concept of professional scepticism in audit has received a lot of attention from policymakers, regulators, politicians and the public over the years since the global financial crisis.
‘It is important that all these stakeholders, as well as auditors themselves, understand the extent to which cognitive bias affects the audit process and the ways in which it can be managed, but stakeholders should also recognise that bias cannot be eliminated entirely.’
Gambier said ACCA’s recommendations were intended to provide some first steps for auditors, standard-setters, regulators, audit committees, investors and others to better understand the scope and limitations of professional scepticism in audit.
However, he pointed out that ‘the “human factor” in the audit process is both essential and inescapable: even a machine-led audit may be subject to bias as a result of the information provided and the process of analysis.’
ACCA’s report Banishing bias? Audit, objectivity and the value of professional scepticism, is here.
