UK: auditor scepticism - APB feedback statement on discussion paper

The Auditing Practices Board has today published a feedback statement - available here (pdf) - in response to its discussion paper Auditor Scepticism: Raising the Bar (here, pdf). The responses received in respect of the discussion paper have also been published: see here. In its feedback statement the APB states that it will be undertaking further work in these areas:

• Ensuring that there is a consistent understanding of the nature of professional scepticism and its role in the conduct of an audit.
• 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.
• 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.
• Considering how the application of scepticism can be made more transparent.
• 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 auditors.

In its feedback statement, the APB expresses its concern with the lack of consensus about the nature of professional scepticism and its role in the conduct of an audit. The APB also rejects the view that the auditor's role is "limited to ensuring that management have appropriate evidence to support its assertions if this means accepting the evidence management present without subjecting it to robust challenge and comparison to alternative sources of evidence". Indeed, the APB the questions whether a 'neutral mindset' or just an 'inquiring mind' is the appropriate mindset for an auditor where, for example, "this mindset is applied during the planning process to assess the risk of misstatement in the different elements of the financial statements and these risk assessments are fundamental in determining the nature and extent of evidence to be obtained in the rest of the audit, and many of the numbers in financial statements are accounting estimates" (para. 26).