FRC urges auditors to go back to their roots
FRC publishes paper urging auditors to consider the original philosophy and principles of auditing - scepticism
AUDTIORS MUST BE MORE sceptical when judging financial reports, according to the profession’s watchdog.
The Accounting Practices Board, (APB) a branch of the FRC, has published a paper setting out its views on how auditors can instil professional scepticism into their role.
Frustrated by the failure of some auditors to challenge financial statements produced by companies, the FRC has outlined the level of cynicism they want auditors to exhibit.
The paper is designed to provoke new thinking and focus the requirement for scepticism in auditing. It builds on the discussion paper published in 2010, Auditor Scepticism: Raising the Bar, and outlines actions the APB and other parts of the FRC intends to take.
The FRC even gives auditors a history lesson. It uses the paper to explain that the word ‘scepticism’ is derived from the Greek word skepsis, meaning ‘examination into’.
Richard Fleck, chairman of the APB and a director of the FRC (pictured) said: “The critical importance of professional scepticism to audit quality is widely recognised but, as we previously found, there is a lack of consensus as to its nature and its role in the audit.
“This paper addresses that lack of consensus and ensures that there is a consistent understanding of the nature of professional scepticism and its role in the conduct of an audit.
“I hope that this paper will be an important point of reference for auditors, companies and those who use audited financial statements and that it will be considered carefully and contribute to confidence in financial reporting.”
Audit committee members are encouraged to recognise the “important role they have” and their contribution to promoting professional scepticism in judgments, states the FRC.