Professional scepticism at different stages of the Maltese statutory audit

Abstract

Purpose: This research set out to assess how auditors apply professional scepticism at each stage of the Maltese statutory audit, identifying the challenges and barriers faced by auditors in that respect. It also aimed to establish how a professionally sceptic attitude is documented. Finally it assessed the impact of the 2008 financial crisis on professional scepticism exercised by Maltese auditors. Design: Nine interviews were conducted with audit practitioners from various firm backgrounds to explore the extent to which scepticism is applied. Additionally online questionnaires were distributed to auditors, willing to participate in this project. Findings: Findings indicate that Maltese auditors have a good understanding of professional scepticism. Research conducted identified that Maltese auditors mainly use the neutral approach to scepticism and perceive scepticism to be equally important across all stages of the audit engagement. Generally auditors perceive non-standardised documentation methods to be the most effective in encapsulating the auditor’s sceptical mindset. It also transpired that changes resulting from the crisis have resulted in an increase of both the actual level of scepticism exercised and the extent of documentation kept in file. Conclusions: This study concludes that whilst the local profession recognizes the importance of scepticism throughout the audit process, more effort is needed in; helping new auditors and stakeholders understand the concept of scepticism and in mitigating the extensive pressures which are impairing an auditor’s ability to exercise appropriate scepticism. Implications: This scope of this research is to help auditors understand better the importance of professional scepticism throughout the audit process and stimulate action on the barriers impairing auditor scepticism. It should also help audit firms reflect on their current documentation methods and their suitability in evidencing sceptical thoughts and actions. Finally, through its findings and recommendations it sheds light on the role that stakeholders should play in fostering auditor scepticism and encourage meaningful discussion between both sides to safeguard it.