Banishing bias? Audit, objectivity and the value of professional scepticism

This report explores the importance of cognitive biases to the audit process. It explains how these biases are central to improving the exercise of professional scepticism and to understanding the fundamental ethical principle of objectivity.


Professional scepticism has received a lot of attention, from policymakers, regulators, politicians and the public. After nearly a decade of action, audit quality has undoubtedly improved. Yet, calls for more professional scepticism have not abated. 

This report seeks to understand why, and what should be done about it. Drawing on the established and respected psychology literature on cognitive biases, pioneered by Amos Tversky and Daniel Kahneman, this report argues that a new approach to professional scepticism is needed if expectations of further increases in audit quality are to be met. There are two main reasons for this.

Firstly, existing auditing standards are susceptible to cognitive biases by auditors. Auditors need to plan and execute their audits differently in order to mitigate the effects of these unconscious biases. Additionally, in some areas, the auditing standards themselves may need to change. This report makes recommendations for auditors and for standard setters.

Secondly, other stakeholders in the financial reporting supply chain also need to be aware of their own cognitive biases. While the recommendations for auditors and standard setters are important, the actions of others, including preparers, audit regulators, audit committee members, investors and the general public are just as important. In some cases, these stakeholders’ perceptions of a lack of audit quality may be affected by cognitive biases. In such cases, interventions that require auditors to change their behaviour may not serve to increase audit quality. Indeed, to the extent that auditors are required to undertake procedures that do not add value, they may even reduce audit quality. This report recommends a global commitment to audit quality.

In addition, an approach to standardsetting that considers cognitive biases should help bring clarity to the meaning of objectivity within auditing standards.