Auditor scepticism in the spotlight as ACCA launches major new report on cognitive bias

As policymakers and regulators call for more professional scepticism in audit, the Association of Certified Chartered Accountants (ACCA) has recommended changes to the standard-setting, regulatory and audit processes to improve and encourage audit quality and tackle cognitive bias.

ACCA’s report Banishing bias? Audit, objectivity and the value of professional scepticism recommends a holistic approach that encourages market participants to think actively about cognitive bias – underlying behavioural drivers that could influence decision making – and take steps to minimise its impact on audit quality:

Standard-setters are advised to design audit standards with an eye to mitigating the impact of known biases on decision-making. ACCA recommends that, among other methods, standard-setters review possible ‘bias’ within auditing standards and articulate the importance of minimising known bias in application guidance or other explanatory material.

Regulators are encouraged to focus on improvements that support greater audit quality. ACCA urges regulators to be realistic about the limits on completely mitigating bias, and to recognise the ‘human factors’ within the regulatory process.

Auditors, when designing and performing audit procedures, must be more aware of their own subconscious bias, and should take active steps to mitigate its impact on the audit.

“The concept of professional scepticism in audit has received a lot of attention from policymakers, regulators, politicians and the public over the years since the global financial crisis,” explained Andrew Gambier, head of audit at ACCA.

“It is important that all these stakeholders, as well as auditors themselves, understand the extent to which cognitive bias affects the audit process and the ways in which it can be managed, but stakeholders should also recognise that bias cannot be eliminated entirely.

“The ‘human factor’ in the audit process is both essential and inescapable: even a machine-led audit may be subject to bias as a result of the information provided and the process of analysis.

“Our recommendations provide some first steps for auditors, standard-setters, regulators, audit committees, investors and others to better understand the scope and limitations of professional scepticism in audit. I encourage these stakeholders to take multilateral action to ensure that audit standards, processes and regulation foster real increases in audit quality.”