PCAOB Publishes Staff Audit Practice Alert on Maintaining and Applying Professional Skepticism in Audits

Washington, DC, Dec. 4, 2012

The Public Company Accounting Oversight Board today published a Staff Audit Practice Alert to remind auditors of their requirement to exercise professional skepticism throughout their audits.

"Investors depend on independent audits to provide a meaningful check on the financial statements prepared by company management," said PCAOB Chairman James R. Doty. "Without professional skepticism, the audit cannot serve that essential function."

The PCAOB continues to observe instances in which circumstances suggest that auditors did not appropriately apply professional skepticism in their audits.

Staff Audit Practice Alert No. 10: Maintaining and Applying Professional Skepticism in Audits focuses on the importance of professional skepticism, the appropriate application of professional skepticism in audits, and certain important considerations for audit firms' quality control systems.

PCAOB standards define professional skepticism as an attitude that includes a questioning mind and a critical assessment of audit evidence, and it is essential to the performance of effective audits under Board standards.

"This Alert discusses factors that impair an auditor's skepticism, and steps that firms and auditors can take to enhance their application of professional skepticism," said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards. "PCAOB standards require every individual auditor to exercise professional skepticism throughout their audits."

The timing of the release of Staff Audit Practice Alert No. 10 is intended to assist audit firms' emphasis in upcoming calendar year-end audits on the importance of the appropriate use of professional skepticism.

Due to the fundamental importance of the appropriate application of professional skepticism in performing an audit in accordance with PCAOB standards, the Board is also continuing to explore whether additional actions might meaningfully enhance auditors' professional skepticism.

The PCAOB publishes Staff Audit Practice Alerts to highlight new, emerging, or otherwise noteworthy circumstances that may affect how auditors conduct audits under the existing requirements of PCAOB standards and relevant laws.

Auditors should determine whether and how to respond to these circumstances based on the specific facts presented. The statements contained in Staff Audit Practice Alerts do not establish rules of the Board and do not reflect any Board determination or judgment about the conduct of any particular firm, auditor, or any other person.