ACCA recommends auditors be more skeptical

The Association of Chartered Certified Accountants has released a new report calling for more professional skepticism on the part of auditors.

The ACCA’s report recommends market participants consider cognitive bias—the behavioral drivers that could influence decision making—more actively and take steps to minimize its impact on audit quality.

The report advises standard-setters to design auditing standards to mitigate the impact of known biases on decision-making. The ACCA suggests that, among other methods, standard-setters review possible “bias” within auditing standards and stress the importance of minimizing known bias in application guidance or other explanatory materials.

ACCA chief executive Helen Brand

The report also encourages regulators to focus on improvements that support greater audit quality. The ACCA is asking regulators to be more realistic about the limitations on completely mitigating bias. They should instead recognize the “human factor” within the regulatory process. The “human factor” in the audit process is inescapable, the ACCA noted, and even a machine-led audit may be subject to bias as a result of the information provided and the process of analysis.

On the part of auditors, the report recommends that when designing and performing audit procedures, they need to be more aware of their own subconscious biases and take active steps to mitigate its impact on the audit.

“The concept of professional skepticism in audit has received a lot of attention from policymakers, regulators, politicians and the public over the years since the global financial crisis,” said Andrew Gambier, head of audit at ACCA. “It is important that all these stakeholders, as well as auditors themselves, understand the extent to which cognitive bias affects the audit process and the ways in which it can be managed, but stakeholders should also recognize that bias cannot be eliminated entirely. Our recommendations provide some first steps for auditors, standard-setters, regulators, audit committees, investors and others to better understand the scope and limitations of professional skepticism in audit. I encourage these stakeholders to take multilateral action to ensure that audit standards, processes and regulation foster real increases in audit quality.”

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