Professional skepticism and auditing standards

Professional skepticism

A questioning mind, alertness to conditions indicating possible error or fraud, and critical evaluation of audit evidence.

Challenging management explanations

Do not accept explanations without corroboration when evidence is needed; challenge assumptions and investigate inconsistencies.

Auditor response to red flags

Recognize possible error or fraud, critically evaluate evidence, and adjust procedures as warranted.

Skepticism versus cynicism

Remain critical, alert, and unbiased without automatically assuming fraud or dishonesty.

GAAS

Generally accepted auditing standards governing competent, independent, diligent, evidence based audits and transparent reporting.

General standards in the slides

Technical training and proficiency, independence in fact and appearance, and due professional care.

Fieldwork standards in the slides

Proper planning and supervision, understanding internal controls to assess risk, and obtaining sufficient appropriate evidence.

Reporting standards in the slides

Address the financial reporting framework, consistency of principles, adequacy of disclosures, and the expressed opinion or reason no opinion is expressed.

Why auditing standards matter

They protect financial reporting credibility, create consistency across audits, reduce information risk, and support market and regulatory integrity.

GAAS standard setter in the slides

The AICPA Auditing Standards Board issues standards for nonissuer audits.