Author: Belverd E. Needles, Jr., Ph.D., CPA, CMA Editor, Accounting Instructors’ Report (AIR), DePaul University
Professional skepticism is an essential component of every audit. It is the foundation for detecting fraud and maintaining an independent attitude (AICPA, 2002). There has been an increased emphasis on professional skepticism in the last decade due to the large-scale accounting fraud cases that were the catalyst for regulatory reforms such as Sarbanes Oxley Act (SOX) in the US, increasing complexities transactions and the expanded use of estimates and fair value which require more accounting judgement.
The lack of professional skepticism has been the case of the majority of the Securitas and Exchange Commission’s enforcement actions and is a major reason for lawsuits against auditors. Professional skepticism is not something that should only be taught in the auditing course but is a complex trait that requires development over a student professional education beginning with introductory accounting. For that reason, all accounting instructors should be familiar with these traits and reinforce them in their classes.