Home Accounting and Auditing Developing the art of professional skepticism

Developing the art of professional skepticism


An auditor should be a professional skeptic. But too often they shy away from confrontation, or probing questions – something that has long been part of the accountants’ professional arsenal.

Surveying the wreckage of accounting lapses in state-owned companies and private sector corporations, we realise that something terrible has burrowed under the skin of the profession. It’s time to restore accounting and auditing to their rightful plinths as the very foundation of a functioning economy.

Auditors and accountants are by nature skeptical. It’s their job to pick up anomalies and sleight of hand. Professional skepticism is not only good, it is essential. This is particularly true of the auditor.

“Professional skepticism has always been used to validate information through probing questions, critical assessment of evidence, and attention to red flags and inconsistencies,” writes Sara Lord in Accounting Today. “The auditor’s use of professional skepticism will need to evolve with the use of technological advancements by the profession and by clients. Skepticism will need to be applied to all stages of the audit process, and the auditor will need to be trained to find risks and potential errors that technology-based tools have missed.”

Lord adds that for decades, auditors have developed professional skepticism by starting with understanding simple relationships and expectations. “For example, agreeing that changes in balance sheet accounts lead to amounts reported in the cash flow statement allowed the auditor to learn how information works together and how financial statement information should flow internally. From this basis, auditors learned to identify anomalies as they progressed through their careers.”

When executing an audit, auditors transitioned from predictable analytical procedures, such as those for depreciation expense, to more complex analyses, such as how changes in revenue are tied to external indicators. These experiences fostered the auditor’s professional skepticism by evaluating expectations and identifying risks and results that don’t make sense in the context of all of the relevant information.

But as we continue the evolution into data-driven technology, how does the auditor know that the results are reasonable? In the world of artificial intelligence, auditors will need to understand and be skeptical about how the software is working and learning, as well as understand why outputs from an artificial intelligence tool were possible, and interpret what they mean in the context of individual and unique client situations.

Read the full article here.