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The exercise of professional skepticism is fundamental to the successful performance of auditors, audit firms, and the audit profession as a whole in discharging their responsibilities to capital markets and to society at large. The auditors’ opinion is intended to instill confidence in the fairness of management’s financial statements and, when required by law or regulation, the operating effectiveness of the auditee’s system of internal control over financial reporting. In order for auditors to live up to their responsibilities to the capital markets, the auditors’ work must be performed with complete objectivity and an appropriate level of professional skepticism. Should the auditors’ level of skepticism be compromised, this would result in substandard audits that are potentially ineffective in detecting the errors or fraud that could result in materially misstated financial statements. The purpose of this paper is to explore these criticisms, consider the potential root causes of the problem, and offer suggestions for how audits and the auditing profession might be improved in order to mitigate these problems.
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