Professional scepticism and cognitive biases in audit

A new report by ACCA, in collaboration with the Hellenic Accounting and Auditing Standards Oversight Board (HAASOB), sets out some of the recurring issues around auditors exercising professional judgement and scepticism within auditing.

Auditors’ professional scepticism has been an ongoing source of concern for many years. Despite the best efforts of auditors to improve professional scepticism, audit inspections continue to reveal that the issue remains.

ACCA and the Hellenic Accounting and Auditing Standards Oversight Board (HAASOB) continue to research the issue of professional scepticism and cognitive biases through audit inspection findings in Greece.
 
Recognising the influence of cognitive biases appears to be resulting in a more robust exercise of professional scepticism. It is clear from ACCA/HAASOB's work that audit firms can address recurring issues with professional scepticism by enhancing their audit methodologies, practices and culture through training.

Following on from this research ACCA/HAASOB are encouraging firms to do the following:

• Use resources to achieve high-quality audits by implementing the International Standard on Quality Management 1 (ISQM 1) and the International Standard on Auditing (ISA) 220 (Revised).
• Recognise the different types of biases set out by the International Auditing and Assurance Standards Board (IAASB) and International Ethics Standards Board for Accountants (IESBA).
• Recognise the importance that authority bias could have in audit and assurance, given the extensive use of experts.
• Be aware that other factors, such as independence or fear of losing an audit engagement, also contribute to poor audit quality.

The report:

• Discusses practical examples inspired by Greek audit inspection findings, demonstrating where the engagement team could have been biased against the selection of certain sources of audit evidence and towards those that are more easily accessible.
• Looks at recent developments in the UK, noting the Financial Reporting Council's What Makes a Good Audit? which specifically highlights the robust exercise of professional judgement and professional scepticism.