The paper has been issued to try to build confidence in the global accounting and audit profession following a series of audit failures and accounting scandals at various listed entities around the world. It follows earlier discussion with stakeholders about the lack of a consistent approach to professional scepticism across the profession in terms of audit and other assurance engagements.

IESBA also admits in the consultation that professional scepticism means different things to different people, particularly in relation to how it should apply to professional accountants who practice in different areas, eg, audits, non audit services, preparing financial statements, management and governance. It also stated that ‘it is a difficult concept to define in a way that is easy to understand and generally accepted by both the profession and other stakeholders’.

It is also not mandatory for accountants to exercise profession scepticism. The consultation considers whether this should be changed to raise standards across the profession, although this could be a challenge to impose unilaterally as the application of professional scepticism depends on the levels of risk involved, although IESBA does stress the need for accountants ‘to have the ability and willingness to stand their ground when facing pressure to do otherwise’.

The downside of introducing a mandatory element ‘might affect the nature and extent of the work effort involved in the provision of professional services other than assurance services by professional accountants in public practice’.

The consultation proposes various approaches, allowing in one instance for a more nuanced definition of scepticism which would require amendment of the Code, although IESBA admits that this could simply add to confusion about the concept.

In response to regulatory and other stakeholder feedback on the topic, the paper poses 10 questions, and examines the various options, based on the following:

• the behavioural characteristics identified as professional scepticism;
• whether all professional accountants should be expected to conform to these; and
• whether the International Code of Ethics for Professional Accountants (including International Independence Standards) should be further developed to address behaviours associated with the exercise of appropriate professional scepticism.

Through this initiative, the IESBA also aims to reinforce the effective exercise of professional skepticism by auditors.

The consultation paper was developed following close coordination with the International Auditing and Assurance Standards Board (IAASB) and the International Accounting Education Standards Board (IAESB), and with advice from the IESBA Consultative Advisory Group.

The paper will form the basis for discussion with a range of stakeholders at a series of three roundtables in Washington DC  on 11 June; Paris on 15 June; and Tokyo on 12 July.

The consultation closes for comment on 15 August 2018.

IESBA consultation paper, Professional Skepticism – Meeting Public Expectations issued 14 May 2018

Report by Sara White