FEATURE STORIES

PROFESSIONAL
SKEPTICISM:
A MODEL FOR
PUBLIC SECTOR
AUDITING
by Dr. Hamid Reza Ganji, Assistant Professor, Department of
Accounting, Alzahra University, and Dr. Ghorban Eskandari,
Senior Auditor, Supreme Audit Court of Iran
Professional skepticism is a key element in high-quality audits,
as it ensures auditor judgments are less clouded by personal
biases. According to audit standards, professional skepticism
involves having a questioning mind and critically assessing audit
evidence. However, there is no universally accepted definition of
professional skepticism. As a result, the ways in which auditors exercise
professional skepticism vary.
Recent discussions in the auditing community have identified two primary approaches
to professional skepticism: “neutrality,” in which the auditor neither assumes management
is dishonest nor unquestioningly assumes honesty, and “presumptive doubt,” in which the
auditor assumes some level of carelessness, incompetence or dishonesty on the part of
financial statement preparers unless the evidence shows otherwise. There is a lack of
consensus on which of these two approaches is most appropriate for auditing.
A Study to Determine a Model for Professional Skepticism
Regulatory bodies, standard setters and academic researchers have recognized the
need to better define what constitutes professional skepticism and develop a model for
how auditors can apply it. To that end, this study examined how auditors in Iran define
professional skepticism, how they exercise it when interacting with different clients, and
how audit entities can better emphasize the importance of professional skepticism.
Previous studies have provided conceptual frameworks for understanding
professional skepticism by reviewing audit standards and testing relationships
between professional skepticism and other variables. This study contributes to the
discussion by basing conclusions about professional skepticism on how it is actually
exercised by Iranian auditors and audit firms.
Research Methodology
The research used a grounded theory approach involving systematic data gathering
and analysis for theory development. Twenty-eight semi-structured interviews were
conducted with independent auditors holding positions at various organizational
levels, such as managers, supervisors and senior auditors.

20 International Journal of Government Auditing—Summer 2020