Professional Skepticism: Standardsetters’ Responsiveness To Stakeholder Comment Letters

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.