Professional skepticism

DIGITALIZATION has changed everything we do. The world has evolved. This is the Covid-19 effect — we now have less face-toface transactions. Fear has gripped the world lest we get infected with the virus. We now do most of our dealings in virtual mode: Zoom meetings, scanned documents and more emails. Movements have become more restricted. Lockdowns have become frequent worldwide.

In this scenario, how do we apply professional skepticism in our audits? Professional skepticism is the foundation of decision-making when we conduct attestation engagements. We are required to have a questioning attitude to alert us of possible misstatements due to fraud or error and have a critical assessment of the audit evidence.

Regulatory bodies, such as the Board of Accountancy, Securities and Exchange Commission, and the Bangko Sentral ng Pilipinas, say auditors are not skeptical enough in carrying out tasks. How skeptical should we be? As auditors, the more skeptical we are, the more time may be spent on audits. It is a four-thousand-peso question. How do we strike a healthy professional skeptical balance?

Is skepticism extra important? Yes. Our degree of skepticism presents the quality of the audits we perform. It demonstrates how we perceive and understand industry idiosyncrasies, nuances, trends and business processes. It is important that we have in-depth knowledge for better insights to give valueadded services to clients. A healthy degree of professional skepticism may help identify business aspects our clients can improve on.

A lot of times, fees we charge our clients may be insufficient. Our time budgets and fees limit us. Should we be limited, too, in being skeptical just because more time may be spent? This is again a four-thousand-peso question.

Further, we should be independent of the data or information we audit. Independence is a must to show integrity.

As professionals, we are adequately trained and acquire regular trainings through webinars, updates and the like. We apply these learnings to our work through diligence in the information we review. We gain critical skills through educa

tion and experience. As we look at relevant data, do we ask the right questions?

We should never be complacent. We have to perform a certain level of review to detect errors. Further, we have also to look from a vantage point to ensure that no material errors are unnoticed. We should also consider evidence in the light of pros and cons to arrive at a better conclusion.

Professional skepticism is unquantifiable and challenges each one of us. Skepticism’s benchmark is quality resulting from our audits to build trust.

Christopher U. Ismael is the founding partner and CEO of Ismael and Co., CPAs. He is a member of the Association of CPAs in Public Practice. The opinion of the writer does not reflect in any way those of these organizations.