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Professional Skepticism. Inquiring Mind. Critical Thinking. These are all discussions and concepts that are pervasive across the standards that guide the accountancy profession. 

  • The International Code of Ethics for Professional Accountants (including the International Independence Standards, which was revised in October 2020 to promote professional accountants’ role and mindset and the International Education Standards (IESs).
  • The IESs were revised in December 2019 to address information and communications technology and professional skepticism learning and development.
  • The concept of professional skepticism lies at the heart of a quality audit as part of the IAASB’s International Standards on Auditing (ISAs) and other assurance standards.

These concepts are interlinked and connected to how professional accountants behave, the skills they apply and the professional judgments they make during the course of each working day. 

Similarities and Differences Between Professional Standards

Professional standards concepts of having an inquiring mind and exercising professional skepticism can be used in similar or different ways depending on context and several factors. For example, one factor to consider is the audience for each standard. The IESs focus on professional accountancy organizations with responsibility for aspiring and professional accountants’ education. The Code focuses on the behavior expected of all professional accountants. And the IAASB’s standards focus on professional accountants providing audit and assurance services.

The second factor to consider is the intent on how each is applied.

  • IESs are relevant to the skills and competences of aspiring and existing professional accountants.
  • The Code's focus is on setting out the fundamental principles of ethics, which establish the standards of behavior expected of all professional accountants, irrespective of their roles.
  • The IAASB professional standards (e.g., ISAs) include additional requirements to critically assess audit evidence, focus on the application to specific services.

Having an Inquiring Mind

The revisions made to both the IESs and the Code raise the behavioral expectations of all professional accountants irrespective of the roles they serve in their employing organizations or clients. These revisions are particularly relevant as we move into a more digital and data-driven world. In 2020 alone, the United Nations noted that 64.2 zettabytes of data were created globally: an increase of 314 percent from 2015. As such, it is vital that a professional accountant considers the source, relevance, and sufficiency of information in relation to the nature, scope, and outputs of the professional activity they are performing regardless of whether this information is system generated or otherwise.

The IAASB’s standards (for example, ISA 200, ISAE 3000) take this one step further and require professional accountants performing audits, reviews, and other assurance services to use professional skepticism when considering data and information. The IAASB defines professional skepticism as “an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud and a critical assessment of evidence”. In a data and information context this could include being alert to other data or information that calls into question the reliability of documents and responses to inquiries to be used as evidence.

Whether having an inquiring mind or exercising professional skepticism skills, or when working with data and information, professional accountants may need to:

  • Identify, address, and evaluate various threats to the quality and integrity of the data
  • Remain alert for new information and changes in facts and circumstances
  • Exercise professional judgment
  • Apply critical thinking skills to interpret the story
  • Spot trends and irregularities
  • Find solutions to problems
  • Be aware of how conscious and unconscious bias might impact how the data or information is used, analyzed, or reported on

Developing an Inquiring Mind

For professional accountants, developing new skills or enhancing existing skills and competences will always be important. But there are still foundational skills and competences that we have in our skills ‘toolkit’ that should be leveraged when working with data and information. The IESs provide this baseline or foundation.

Skills needed for developing an inquiring mind could include (parenthetical references indicate relevant foundational skills included in the IES, not intended to be exhaustive):

  • Understanding a business and its risks (IES 2(f)(iii))
  • Continually asking “why” to understand, and when necessary validate, the source(s) of information used in forming judgments and making decisions (IES 3(a)(i))
  • Willing to challenge others and our own thinking in any situation (IES 4(a) (i)-(iii))
  • Ability to self-correct their own thinking (IES 4(a) (i)-(iii))
  • Ability to identify outliers or exceptions in data and information (IES 4(b)(v))
  • Willing to explore or further investigate issues (IES 4(a) (i)-(iii))

These are skills that are often best learned through case studies or practical experience. As such, it is incumbent on each professional accountant to develop and then maintain these skills throughout the course of their career. Invariably, different transactions, environments or data and information will be presented throughout that career, each of which will require the application of these skills in new and different ways.

Acknowledging Bias

Under the Code professional accountants comply with the principle of objectivity, which requires them not to compromise professional or business judgment because of bias, conflict of interest or undue influence of others. (IESBA Code R112.1). As a result, professional accountants should also strive for self-awareness of their own biases and the impact of these biases. Professional accountants need to apply techniques to aim to mitigate their biases when solving problems, informing judgments, making decisions, and reaching well-reasoned conclusions (IES 4 (a) (ii)). A few tips to making this happen are:

  • Working collaboratively with others to avoid tackling issues alone
  • Discussing ideas and concepts with others who think in a different way to yourself
  • Not making decisions based upon the beliefs, messages, and biases that we have previously been exposed to

Why Are These Skills Important?

It is important to maintain these skills and consider the application to new areas as needed. As the profession moves into digital areas and providing sustainability-related services, the importance of having an inquiring mind and of applying skills and competences that involve exercising professional skepticism will continue to be vital. It is incumbent on each professional accountant to have the necessary skills to ask the right questions and challenge in the right areas.

By continuing to develop and maintain these skills, as required by IES 7, it can also help professional accountants to work in constantly changing environments. For example, the COVID-19 pandemic forced many professional accountants (and their employers and clients) to switch to working in a completely virtual environment leading to developing newer skills, such as virtual collaboration, the ability to apply critical thinking skills to help with problem-solving in a fast changing and uncertain environment, and flexing existing skills, such as professional skepticism, when all information was provided virtually.

What Would You Do?

In thinking back to an example that was given at the 2021 IFAC EdExchange Summit, what would you do in this scenario?

As a professional accountant, you are asked by your supervisor to provide a new analysis of electricity consumption over the past five years to help the CEO and CFO decide on the size of a solar panel unit to install. You ask the building maintenance team for electricity usage for the past five years and the team gives you the following data:

  • 2021             18,589 KwH
  • 2020             29,346 KwH
  • 2019             30,134 KwH
  • 2018             28,986 KwH
  • 2017             29,899 KwH

Are you ready to pass the analysis through to your supervisor? Recognizing this data is going to be used to support a significant capital investment, we hope not. Applying an inquiring mind, some of the questions that a professional accountant may want to ask, when faced with this data, might include:

  • Is this annual data or another averaged time period?
  • Is this for the full facility or a portion?
  • What is the source of this data and does it represent the electricity use that the company pays for?
  • What is causing the decreased usage in the last year and is this decrease something that may continue into the future (e.g., purchase of more efficient plant and equipment, impact of COVID-19, reduced production capacity, closure of certain units)?
  • Has the company returned post-COVID-19 to having all employees on site or have there been further lockdowns during 2021?

If this data comes from a system inside the organization, additional questions arise, such as:

  • Where does the data come from and why is it retained (i.e., is it data that is meaningful and relevant to the analysis you have been asked to perform)?
  • Who controls the system and how can you ensure the data is complete and accurately extracted from the system? What is their competence? How capable are they of providing this data—have they been prone to errors in the past or does it require some additional skills to be able to obtain this data?
  • Is it possible to verify the data (e.g., through comparison with external sources such as invoices from electricity providers)?

This list is not meant to be exhaustive and should vary depending on many factors. Hopefully it sparks some thoughts as you apply your own inquiring mind to your current and future work.

Susan Flis

Sue Flis joined the IPAE in 2020 and was nominated by the Forum of Firms. Sue currently works for Ernst & Young LLP in their Global Standards, Methodology and Implementation Group.

Sue previously was a technical advisor and Board Member for the International Accounting Education Standards Board. Sue earned her Bachelor of Business Administration from Kent State University.

Greg Owens

Mr. Greg Owens was nominated by BDO LLP to serve on the International Panel on Accountancy Education (IPAE) in 2019 and re-appointed in 2021.

Prior to serving on the IPAE, Greg was a member of the International Accounting Education Standards Board (IAESB) (2014-2019) having previously served as a technical advisor (2008-2014). During this time, Greg served on a number of working groups, task forces, the steering committee and was Deputy Chair in 2019.

Greg is currently a Director in BDO's Global Assurance Department where has helped to develop and support his network's technology, methodology and learning resources for use by BDO firms. Since 2000, Greg has also trained or presented in over 35 countries and has represented his firm in a number of educational working groups (such as the ICAEW's Assessment Committee and Syllabus/Curriculum groups) as well as cross-firm/employer working groups (such as the UK's apprenticeship qualification). Greg has experience in auditing financial services, manufacturing, and hospitality clients, providing audit methodology support to engagement teams, performing file reviews and liaising with audit regulators.

Mr. Owens is a politics & economics graduate who qualified as a Chartered Accountant (ICAEW) in 2000 and became a Fellow Chartered Accountant in 2010.

Helen Partridge

CFO and Director, Accountancy Education

Helen Partridge was named IFAC’s CFO in April 2023. She leads IFAC’s finance team, manages its sustainability and carbon footprint reporting, and provides counsel to IFAC’s CEO. Ms. Partridge is also IFAC’s Director, Accountancy Education, leading IFAC’s global approach to advancing accountancy education, including working with the International Panel on Accountancy Education and education directors at IFAC’s member organizations and the Forum of Firms member firms. 

Prior to joining IFAC, Ms. Partridge was an accountant in practice, having spent 16 years in audit, advisory and audit systems design in the US and Asia Pacific. She has also served in the controllership function at a large multinational transportation company working with GAAP conversions, financial statement preparations and complex and significant transactions such as business combinations and tax planning. Ms. Partridge also serves on a not-for-profit board and is a CPA licensed in multiple states in the United States.