The Public Company Accounting Oversight Board has issued 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 in a statement. "Without professional skepticism, the audit cannot serve that essential function."

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

PCAOB chief auditor and director of professional standards Martin Baumann described several instances of where firms failed to exercise professional skepticism in their audits, including in the use of an outside pricing service, during an AICPA Conference on Current SEC and PCAOB Developments in Washington, D.C., on Tuesday.

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 PCAOB 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 Baumann. "PCAOB standards require every individual auditor to exercise professional skepticism throughout their audits."

The timing of the release of the staff audit practice alert is intended to encourage auditing firms to emphasize the importance of the appropriate use of professional skepticism when conducting the upcoming calendar year-end audits.

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.

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