Key Characteristics

1. Questioning Mindset: Auditors should consistently ask whether the information and evidence obtained during the audit makes sense, applying a "trust but verify" approach.

2. Critical Thinking: Evaluating evidence with professional judgment, without assuming that management is inherently honest or dishonest.

3. Diligence: Ensuring that explanations provided by management are not accepted at face value but are tested against corroborating evidence.

4. Independence and Objectivity: Maintaining objectivity throughout the audit process by avoiding undue influence from time pressures, personal relationships, or other biases.

Challenges to Professional Skepticism

The PCAOB has identified several conditions that may impede skepticism:

- Financial incentives: Pressure to maintain long-term audit engagements or satisfy clients may reduce skepticism.

- Time pressures: Deadlines can lead to shortcuts in critical evaluations.

- Familiarity risks: Close relationships with client personnel might lead to reduced skepticism.

Importance in Auditing

Professional skepticism ensures that auditors:

- Adequately assess the reliability of evidence.

- Identify risks of material misstatement.

- Reach well-supported conclusions, even under challenging circumstances.