1. Professional Skepticism – Longer-Term Initiative
Richard Fleck, Task Force Chair
IESBA Meeting
Livingstone, Zambia
December 4-8, 2017

2. Professional Skepticism
Objectives
To consider the Task Force proposed approach for progressing the longer-term professional skepticism initiative.

3. Professional Skepticism
Background
An outgrowth of the short-term PS project
May 2017 ED “Proposed Application Material Related to Professional Skepticism and Professional Judgment”
Pressure from some stakeholders as to how the Code should address PS beyond audit and other assurance engagements

4. Recap of Initiatives to Date
Professional Skepticism
Recap of Initiatives to Date
Given the pressure from stakeholders, the TF believed that the IESBA should address whether PS – or something like it – should be required of all PAs when performing professional activities
Considered PS as defined by IAASB, along with “critical mindset”
Professional Skepticism
Critical Mindset
Would not be appropriate for general application to all PAs, given IAASB definition
Different “levels” might be necessary to be proportionate
Too close to PS
A subset of objectivity, professional competence and due care, or professional judgment

5. Determining an Approach
Professional Skepticism
Determining an Approach
PS has become a “catch all” jargon term
Discussed and agreed on overarching stakeholder expectations – Being a PA means…
Delivering higher level work product than would be delivered by a non-PA
Expectation that independent judgment and informed thought are applied to satisfy reliability of information
Actively demonstrating compliance with the fundamental principles

6. Task Force Thoughts on the Approach
Professional Skepticism
Task Force Thoughts on the Approach
Leave PS as currently defined and understood (i.e., leave the definition of PS to IAASB
No development of a “new” definition of PS, or a new concept
Stakeholders and the profession need a better understanding of what it means to be a PA, and comply with the fundamental principles
Addresses the behavioral characteristics expected of a PA

7. Characteristics of a PA – Linked to the FPs
Professional Skepticism
Characteristics of a PA – Linked to the FPs
Characteristic
Relationship to Fundamental Principles
Obtaining and understanding the information necessary for reliable judgments
Professional Competence and Due Care
Making informed challenges of views developed by others
Being sensitive to the integrity of Information
Integrity
Withholding judgment pending thoughtful consideration of all relevant information
Being alert to potential bias or other impediments to the proper exercise of professional judgment
Objectivity
Ability and willingness of the PAs to stand their ground

8. Matters for IESBA Consideration
Professional Skepticism
Matters for IESBA Consideration
Does the Board agree with the TF’s views on Determining and Approach (slide 5)?
Are there:
Other outcomes
Other overarching stakeholder expectations in addition to those on slide 5?
Does the Board agree with the TF’s proposed approach on slide 6?
Does the Board agree with the characteristics of a PA as listed on slide 7?

9. Task Force’s Suggested Approach (1 of 2)
Professional Skepticism
Task Force’s Suggested Approach (1 of 2)
Link the characteristics to “acting in the public interest” – adding a sentence to paragraph 100.1, draft as follows:
Acting in the public interest in based on a commitment to (1) produce reliable, high-quality, objective outcomes, and (2) act in a manner that will preserve the public’s trust in the profession.
Introduce additional application material that develops the understanding of particular fundamental principles, and how compliance with them can be achieved

10. Task Force’s Suggested Approach (2 of 2)
Professional Skepticism
Task Force’s Suggested Approach (2 of 2)
Raise the profile of biases/influences/threats (paragraph 18) and provide support to PAs in overcoming them.
Develop a consultation paper to include open questions and to establish the level of agreement or disagreement with the proposed approach, and ask for additional input
Consider rebranding the project to: Leveraging the Fundamental Principles to Act in the Public Interest

11. Professional Skepticism
Proposed Way Forward
Ask the IAASB and IAESB whether anything in the proposed approach conflicts with their remits or would be inconsistent with their standards
Develop the consultation paper seeking input from stakeholders on the proposed approach
Present the draft consultation paper for consideration at the March 2018 meeting

12. Matters for IESBA Consideration
Professional Skepticism
Matters for IESBA Consideration
Does the Board support the proposed approach?
Does the Board support the proposed change to the title of this project?