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Professional Skepticism: Standardsetters’ Responsiveness To Stakeholder Comment Letters

Author

Listed:
  • Arianna Spina Pinello
  • Ara Volkan
  • Mark Arnone
  • Jamie Lancellot
  • Lana Luckey

Abstract

Auditing standards direct auditors to exercise professional skepticism (PS) in all facets of an audit. However, until the 2020 revisions to both US and global auditing standards were issued, there were no clear definitions of or guidance on how PS can be demonstrated and documented. How to exercise PS was left to the individual auditor to decide. Ironically, the same regulatory bodies often criticized and, occasionally, took punitive action against auditors, citing a lack of PS. To close this expectation gap, both the International Ethics Standards Board for Accountants (IESBA) and the American Institute of Certified Public Accountants (AICPA) issued proposals to define, demonstrate, and appropriately apply PS. This paper provides an overview of both proposals, analyzes comment letters submitted by constituents at the exposure draft stage of the due process, and describes how and to what extent constituent input impacted the final standards issued in 2020. The results suggest that constituents generally supported both proposals. While the AICPA and IESBA incorporated some of the constituent input in their final standards, several major stakeholder recommendations were ignored. Stakeholder feedback overwhelmingly suggests that added guidance for the proper application of PS is needed, along with education and training programs.

Suggested Citation

  • Arianna Spina Pinello & Ara Volkan & Mark Arnone & Jamie Lancellot & Lana Luckey, 2022. "Professional Skepticism: Standardsetters’ Responsiveness To Stakeholder Comment Letters," Accounting & Taxation, The Institute for Business and Finance Research, vol. 14(1), pages 57-74.
    • Handle: RePEc:ibf:acttax:v:14:y:2022:i:1:p:57-74
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    References listed on IDEAS

    as
    1. Nolder, Christine J. & Kadous, Kathryn, 2018. "Grounding the professional skepticism construct in mindset and attitude theory: A way forward," Accounting, Organizations and Society, Elsevier, vol. 67(C), pages 1-14.
    2. Thomas C. Omer & Nathan Y. Sharp & Dechun Wang, 2018. "The Impact of Religion on the Going Concern Reporting Decisions of Local Audit Offices," Journal of Business Ethics, Springer, vol. 149(4), pages 811-831, June.
    3. Helen L. Brown-Liburd, 2017. "Discussion of “Encouraging Professional Skepticism in the Industry Specialization Era”," Journal of Business Ethics, Springer, vol. 142(2), pages 257-258, May.
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    More about this item

    Keywords

    IESBA; AICPA; Professional Skepticism; Audit Engagements; Audit Standards;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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